January 19, 2017 / 16:13 IST
HDFC Securities' research report on DCB Bank DCBB sprung a pleasant surprise with a healthy performance across parameters. Led by (1) Strong growth (+24% YoY), (2) Superior NIM of 3.95% and (3) A stable core C-I ratio of 63%, DCBB’s core (+31% YoY) and net (+25% YoY) earnings beat estimates. CASA ratio stood at 26%, up 400bps QoQ (though not sustainable, we believe) with a sharp 58% rise in SA. CRAR improved by 140bps QoQ due to the revaluation of premises and issue of Tier II bonds.
OutlookWhile NIM and efficiency ratios are impressive as of now, stiff competition in the mortgage portfolio, falling interest rates and costs related to aggressive expansion are key monitorables. We continue to like DCBB for its healthy business growth, granular book, tight leash on asset quality and conservative management. Maintain BUY with revised TP of Rs 143 (1.8x Dec-18E ABV of Rs 79.2).
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