Key trends such as loan growth and cost increase were broadly in line, as DCB reported flat earnings growth y-o-y. Strong NII growth of 26% y-o-y was offset by similar cost growth and lower other income (high base), leading to soft PPoP growth of 3% y-o-y. Asset quality was broadly stable. Cost growth following branch expansion will keep return ratios depressed (lower than 12% ROE in FY2017-18E) in the medium-term. We retain ‘add’ rating with target price of Rs115 (from Rs105 earlier).
DCB delivered flat earnings y-o-y, as strong NII growth (26% y-o-y) was offset by strong cost growth (27% y-o-y), lower non-interest income (5% y-o-y decline) and growth in provisions (14% y-o-y). Core business performed well with 28% y-o-y loan growth and 20 bps y-o-y expansion (flat q-o-q) in NIM (calculated). Deposit growth was moderate at 18% y-o-y, with retail deposit growth of 19% y-o-y and CASA growth of 18%.
CASA ratio is broadly unchanged at 23%. Gross NPL ratio increased 20 bps q-o-q to 1.7%. Absolute growth in GNPL was high at 17% q-o-q, with PCR declining 200 bps q-o-q to 75%. Slippages were broadly stable q-o-q at 1.8%.