ICICIdirect.com's report on DCB Bank
DCB Bank continued its strong operational performance with NII increasing 29.6% YoY and other income rising 38.3% YoY to Rs 130 crore & Rs 46 crore, respectively led by strong business growth
Headline asset quality was stable as absolute GNPA increased by Rs 7 crore QoQ to Rs 186 crore. However, there was a one-off wherein a three year RA single account of Rs 65 crore slipped into NPA in Q4. This was sold to ARCs. Excluding this, slippages were in the usual range of ~Rs 20 crore. Provision coverage was healthy at 74.7%.
PAT increased strongly by 61% YoY to Rs 62.9 crore vs. estimate of Rs 49 crore mainly aided by write-back in tax provisions of Rs 9.3 crore
However, opex was higher than estimated at Rs 108 crore in Q4FY15. Accordingly, the C/I ratio stood at 61% vs. 57% estimated
Credit, deposits grew higher than system at 29% YoY (Rs 10465 crore) & 22% YoY (Rs 12609 crore), respectively. NIM improved 5 bps QoQ to 3.75%
"Visibility of earnings growth is strong on the back of i) steady NII growth & ii) stringent lending mechanism to maintain stable asset quality and low provisioning. It is adequately capitalised with tier 1 ratio of 14.2%. Return ratios are decent with 1.3% RoA and 14% RoE. We have raised our earnings estimates and factor in 18% CAGR over FY15-17E as we factor in higher credit traction. We value at revised FY17E ABV of Rs 66.6 and raise our target price to Rs 160 valuing at 2.4x vs. 2.2x earlier. We maintain BUY", says ICICIdirect.com research report.
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