Arihant Capital Markets
DCB Bank reported strong growth this quarter. Operating Profit came in at Rs 123 crore. for Q3FY18 as against Rs 109 crore in Q3 FY17 registering robust growth of 12%. Net profit increased to Rs 57 crore up by 11% y-o-y and de-grew by 3% sequentially. Deposits for the bank grew at 13% y-o-y and 4% sequentially. The CASA portion for the bank stood at Rs 5,447 crore rising by 12% y-o-y & 3% sequentially. CASA ratio stood at 25.7% vs. 25.9% y-o-y. Retail term deposits stood at 52%. Cost of funds decreased by 7 bps sequentially to 6.4%. NIM for the quarter came in at 4.12% vs. 4.22% sequentially & grew by 10 bps y-o-y. Bank’s advances comprise of Retail Mortgages (42%); Gold Loans (2%); Commercial Vehicles (5%); SME / MSME (12%); Agri and Inclusive Banking (AIB) (17%), Construction Finance (3%) and Corporate Banking (17%). C/D ratio for the bank stood at 87.3%. Yield on advances dropped by 49 bps y-o-y and increased 8 bps sequentially at 11.52%. Asset quality for the bank deteriorated. Gross NPA for the quarter stood at 1.91% vs. 1.82% y-o-y while Net NPA was at 0.87% y-o-y basis. Fresh slippages during the quarter were Rs 103 crore vs.
Rs 77.5 crore sequentially and Rs 79.3 crore y-o-y. Recovery during the quarter stood at Rs 30.7 crore vs Rs 21.2 crore sequentially and Rs 64 crore y-o-y. PCR for the quarter stood at 73.36%. Bank has added 5 new branches taking the total to 311 and 23 ATM’s taking the total to 530. Cost to income ratio for the bank increased to 62.3% from 60.3% q-o-q and 60.07% y-o-y. We have pegged a multiple of 2.15(x) to FY 19E ABV & arrived at a fair value of Rs 196 per share. At CMP of Rs 184 the stock is available at its FY 19E P/ABV of 2.0(x). We have ‘HOLD’ rating on the stock.