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Development Credit Bank Ltd’s (DCB’s) Q1FY12 results were below CRISIL
Research’s expectations due to higher cost to income and subdued noninterest
income despite lower provisions and nil tax outgo during the quarter.
Advances and deposits book of the bank grew 22% and 17%, respectively, yo-
y. We will revisit our estimates post interaction with the management. We
maintain the fundamental grade of 2/5.
Q1FY12 result analysis
• DCB’s Q1FY12 net interest income grew 19.9% y-o-y (up 3.4% q-o-q) to
Rs 519 mn primarily driven by advances that increased 22% y-o-y and
almost stable net interest margins (NIMs) of 3.1%. Non-interest income
remained subdued, declining 21.7% y-o-y and 19.9% q-o-q. Hence, the
total income of the bank grew 2.9% y-o-y but fell 5.2% q-o-q.
• Operational costs grew 16.2% y-o-y (up 2.4% q-o-q) to Rs 588 bn largely
due to increase in staff costs (up 22.4% y-o-y). On account of this, the
cost to income has significantly risen to 78% in Q1FY12 from 69% in
Q1FY11.
• Despite growing its advance book by 22% y-o-y (1% q-o-q), the bank has
been able to report lower provisions and contingencies, which were down
68.5% y-o-y (down 4.3% q-o-q). The bank has been able to report healthy
asset quality viz. gross NPAs and net NPAs of 5.9% and 1.2%, respectively.
• Profit after tax declined 22.3% q-o-q to Rs 88 mn due to higher operational
cost despite lower provisions and nil tax outgo. EPS for Q1FY12 was
Rs 0.44 compared to Rs 0.56 in Q4FY11.
• Total deposits grew 17% y-o-y to Rs 60 bn led by 20% growth in retail
deposits (consists of retail CASA and retail term deposits), which
contributed ~82% to total deposits. However, the bank’s CASA ratio
declined 267 bps y-o-y and 191 bps q-o-q to 33% in Q1FY12.
Valuations: Current market price is aligned
We continue to use the justified price-to-book ratio (P/B) method to value
DCB. We maintain our fair value of Rs 61 per share. Consequently, we retain
the valuation grade of 3/5.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Development Credit Bank Ltd’s (DCB’s) Q1FY12 results were below CRISIL
Research’s expectations due to higher cost to income and subdued noninterest
income despite lower provisions and nil tax outgo during the quarter.
Advances and deposits book of the bank grew 22% and 17%, respectively, yo-
y. We will revisit our estimates post interaction with the management. We
maintain the fundamental grade of 2/5.
Q1FY12 result analysis
• DCB’s Q1FY12 net interest income grew 19.9% y-o-y (up 3.4% q-o-q) to
Rs 519 mn primarily driven by advances that increased 22% y-o-y and
almost stable net interest margins (NIMs) of 3.1%. Non-interest income
remained subdued, declining 21.7% y-o-y and 19.9% q-o-q. Hence, the
total income of the bank grew 2.9% y-o-y but fell 5.2% q-o-q.
• Operational costs grew 16.2% y-o-y (up 2.4% q-o-q) to Rs 588 bn largely
due to increase in staff costs (up 22.4% y-o-y). On account of this, the
cost to income has significantly risen to 78% in Q1FY12 from 69% in
Q1FY11.
• Despite growing its advance book by 22% y-o-y (1% q-o-q), the bank has
been able to report lower provisions and contingencies, which were down
68.5% y-o-y (down 4.3% q-o-q). The bank has been able to report healthy
asset quality viz. gross NPAs and net NPAs of 5.9% and 1.2%, respectively.
• Profit after tax declined 22.3% q-o-q to Rs 88 mn due to higher operational
cost despite lower provisions and nil tax outgo. EPS for Q1FY12 was
Rs 0.44 compared to Rs 0.56 in Q4FY11.
• Total deposits grew 17% y-o-y to Rs 60 bn led by 20% growth in retail
deposits (consists of retail CASA and retail term deposits), which
contributed ~82% to total deposits. However, the bank’s CASA ratio
declined 267 bps y-o-y and 191 bps q-o-q to 33% in Q1FY12.
Valuations: Current market price is aligned
We continue to use the justified price-to-book ratio (P/B) method to value
DCB. We maintain our fair value of Rs 61 per share. Consequently, we retain
the valuation grade of 3/5.
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