Dhanlaxmi Bank bets on higher NIM, rising expenses a worry

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Moneycontrol Bureau

Dhanlaxmi Bank 's second quarter net profit nearly three fold to Rs 4.35 crore year-on-year, driven by a whopping 90% growth in net interest income (NII) and fee based income. The bank's total business grew 45% Y-o-Y to Rs 23,945 crore as on September 30, 2011.

"Our net interest income should improve further in FY12," Bipin Kabra, CFO, Dhanlaxmi Bank told Moneycontrol.com.

"We would maintain a net interest margin in the range of 2.5-2.6% for the entire fiscal year. More than half of our loan book growth is coming from the retail business while the rest is from corporate as well as small and medium enterprises," he said.

NII is the difference between interest earned and interest expended.

Bank's loan book expanded 44% Y-o-Y to Rs.10,130 crore while total deposits were up 45% to Rs. 13,815 crore during the same period. Its net interest margin (NIM) increased from 2% to 2.20% quarter-on-quarter as the bank successfully passed on policy rate hikes by the Reserve Bank of India to its customers.

Loan book break-up:

Retail	52%
Corporates	33%
SME	15%

 

 

The lender has managed to improve its asset quality. Net non-performing assets (NPAs) stood at 0.17% compared 0.23% in Q1 and gross NPAs at 0.55% as against 0.63% in Q1.

However, its operating expenses climbed 45% Y-o-Y to Rs 112 crore on the back of higher employee cost and other operation expenses. In April-June quarter too, operating expenses shot up nearly 51% Y-o-Y to Rs 104 crore.

"The bank is showing good growth on lower base. However, the rising operating cost poses some concern on the bank's ratings. If it continues to rise exponentially, it might impact the bank's ratings," a top official from a rating agency told Moneycontrol on condition of anonymity.

When asked, the CFO replied, "It is natural that expenses will rise with the pace of bank's growth. We are recruiting people. In September quarter alone, we have recruited 35 people."

The bank's total Capital Adequacy Ratio (CAR) as at September 30, 2011 (computed as per Basel II guidelines) remained strong at 10.70%, as against the regulatory minimum of 9%. Tier-I CAR was 8.73% against 7.85% as on September 30, 2010.
 

Saikat Das
saikat.das@network18online.com

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