ICICI Direct's research report on DCB Bank
DCB Bank has posted mixed set of numbers overall for Q3FY21 with stable margins and controlled opex. However, asset quality has weakened, with increase in restructuring guidance and elevated credit cost expected. For the bank, headline asset quality numbers looked sanguine, as GNPA and NNPA ratio declined from 2.27% and 0.83% to 1.96% and 0.59% QoQ, respectively. This was due to standstill asset classification norms. On a proforma basis, GNPA and NNPA ratio increased 131 bps and 100 bps QoQ to 3.70% and 1.92%, respectively. The bank has restructured loans worth Rs 687 crore (~2.7% of loans) and further expects ~5% of loans to come-up for restructuring. During the quarter, the bank has made provisions worth Rs 86 crore, towards Covid related stress. As a result, it now holds provisions worth Rs 229 crore, towards the same. In addition to this, the bank has floating provisions worth Rs 106 crore. The bank overall has provision buffer of ~2% of net advances.
Outlook
We downgrade our rating on the stock from Buy to HOLD with a revised target price of Rs 130/share (Rs 135 earlier), valuing the business at ~1x FY23E ABV.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.
Copyright © e-Eighteen.com Ltd All rights resderved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express writtern permission of moneycontrol.com is prohibited.
Read More
