‘Hope to wipe out losses this quarter’

After reporting a 60 per cent jump in net profit for Q4 FY15 and 26 per cent for the full year ending March 2015, Murali Natrajan, MD and CEO of DCB Bank, spoke to BusinessLine on growing the bank’s retail book in FY16 and the pressure on margins in the next six months. Excerpts:

Can you throw light on what has helped the profit during the fourth quarter?

The quarter has been decent with ₹63 crore as net profit. This includes deferred tax assets credit, which if removed, makes a profit of ₹53 crore, still growing by 35 per cent.

This is because of us absorbing our previous losses. On the balance sheet, we now have an accumulated loss of ₹4 crore, which we will hopefully wipe out this quarter (Q1 FY16).

Also, our advances grew by 29 per cent with a slight growth in mortgages (42 per cent), agriculture and inclusive banking (15 per cent) and corporate loans (23 per cent). In addition, our margins and cost of funds have improved.

Your asset quality has deteriorated. What is your outlook on NPAs going forward?

In the full year (2014-15), our fresh slippages were at ₹174 crore while in the fourth quarter they were at ₹86 crore. During the quarter, we sold a shipyard company’s restructured assets worth ₹65 crore, which turned into an NPA.

We recovered about ₹20 crore from the asset. Our NPAs in retail, agriculture and SMEs should be in control, going forward.

Last quarter, you said you were focusing on retail book. How much has it grown?

Our retail mortgages contribute 42-45 per cent. The overall book is growing at 28 per cent and retail is growing at about 30-35 per cent. We are strong believers in retail. On retail deposits, current account and savings account (CASA) growth has been 14 and 17 per cent, respectively.

The CASA share has reduced because our term deposits’ share has increased. As our new branches start to mature in one to two years, we will see the share of CASA too increasing.

What is your outlook on net interest margins?

In the next six months or so, our margins should get impacted negatively with a drop of about 25-30 bps because deposit rates will come down slightly later than the loan rates. If deposit rates come down, we will cut our base rate (10.85 per cent) and pass it on to customers. As of now, our base rate computation doesn’t require any tweaking of the base rate.

You had raised ₹250 crore in October last year. Do you have further capital raising plans?

Our capital adequacy ratio is at 14.95 per cent and tier-I capital is at 14.21 per cent. So, we may not need funds for the next 12-18 months.

What are your expansion plans?

We are looking at increasing our network by 25-30 branches every year. So, hopefully we will reach close to 175-180 branches by this year end (March 2016).

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