Buy DCB Bank; target of Rs 175: ICICI Securities

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26 Aug, 2025 12:21

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We met Mr Praveen Kutty, MD&CEO of DCB Bank (DCB). Highlights: 1) Management is re-orienting DCB towards being customer-centric, as opposed to being product-centric earlier. Over the medium term, management believes this should ideally enable higher customer engagement, enrich depth of relationship, improve cross-selling, lower cost of acquisition and scale benefits and in whole, position the bank better vs. competition. 2) Co-lending share has grown swiftly to ~13% of overall loans; growth here is now likely to be similar to overall loans. Co-lending is slightly NIM dilutive, but has significantly higher RoE. 3) Given the lead-lag on interest rate, NIM may experience pressure, but DCB expects fee/treasury gains and contained opex to cushion the impact. 4) While a large part of the rise in gross slippages (vs. pre-Covid-19) is related to gold loans (minimal impact on credit costs), the bank aims to further tighten its underwriting. Maintain BUY.

The heavy-lifting phase on investment in branch/headcount too seems over; RoA improvement could come through once the NIM cycle reverses in FY27. On balance, we maintain BUY with an unchanged TP of INR 175, valuing the stock at ~0.8x FY27E ABV.

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