Akash Jain
DCB Bank is one of the best managed small sized private sector bank. We are bullish on this company and expect it to double in next 5 years.
The company has reported decent set of numbers in Q4FY18 result. Advances registered a growth of 28.6 percent which is the highest in the last six quarters mainly led by corporate, SME and mortgage book.
In Q4FY18, deposit growth remained strong at 24.5 percent Y-o-Y to Rs 24,007 crore. CASA ratio stood at 24.3 percent which has room for further improvement. 74 percent of deposits consist of retail deposits, which are steady by nature and less subject to interest rate volatility.
The company has embarked on an aggressive branch expansion in the last two years (from 198 to 318 now) which will improve its net interest margin.
During the period FY11-17, the company increased its loan book by 3x from Rs. 4,271 crores in FY11 to Rs 15,816 crores in FY17 and has reduced its risky unsecured loan book in the past couple of years while loan growth is now contributed by mortgage (secured book), which now comprises 40 percent of total loan book.
Today, the bank has healthy asset quality. In Q4FY18, Gross NPA ratio reduced by 10 bps to 1.79 percent whereas Net NPA ratio improved to 0.72 percent on Q-o-Q basis. PCR stood at 75 percent which signifies healthy balance sheet. Slippages too were lower at Rs. 81.4 crores in Q4FY18.
In addition, the company enjoys superior return ratios with Return on Assets of 0.9 percent and ROE of 11 percent which is set to improve in coming years.
Disclaimer: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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