The stock of DCB Bank that announced its March quarter results last Friday, is down 4 per cent today, owing to the 24 per cent y-o-y decline in net profit during the March quarter.
A closer look at the numbers, though, does not paint a gloomy picture. Thanks to a healthy 22 per cent growth in net advances as of March 2017, the bank’s core net interest income, has in fact grown by 31 per cent y-o-y during the March quarter.
But what has led to the decline in net profit despite the strong core performance, is the negligible tax during the same quarter last year, which has optically pulled down the earnings performance. The bank’s pre-tax profit has posted a 17 per cent y-o-y increase during the latest March quarter.
On the asset quality front, the bank has seen a marginal slippage, with gross non performing assets (GNPA) increasing sequentially by 11 per cent in the March quarter.
GNPA has inched up slightly from 1.55 per cent of loans during the December quarter to 1.59 per cent during the March quarter.
Net NPA (net of provisions) too have gone up marginally from 0.74 per cent to 0.79 per cent during this period, with provision coverage ratio falling by about 2 percentage points.
NPAs have inched up in mortgages, Agri Inclusive Banking (AIB), corporate, and CV segments. Mortgage contributes a chunk (43 per cent) of the bank’s loans, with 70-75 per cent constituting the LAP (loan against property) portfolio.
Slippages moderating is a positive for the bank. However, going ahead, the bank’s continued focus on diversifying loan book and containing slippages will be keenly watched. Also given its size, loan growth should not be an issue. Nonetheless, pace of addition of branches and its consequent impact on the bank’s cost to income ratio will be crucial drivers of earnings.
The bank has completed almost 70 per cent of the 150 new branches roll out plan announced in October 2015 and aims to cross 300 + branches by December 2017.