DCB Bank (DCB) | Q3FY15 Result/Concall Update | CMP: Rs.123 | Rating: HOLD | Target: Rs.120. :: IndiaNivesh

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Result Highlights:
 DCB Bank results were broadly in line with our estimates.
 Advances and Deposits growth were impressive, better than the industry
average, as they grew 29% y-o-y and 24% y-o-y to Rs 94.9 bn and Rs 118.5
bn, respectively. Management is on track to double its balance sheet in three
to four years.
 As a result, NII (adjusted) also grew at a healthy pace of 30% y-o-y to Rs 1.2
bn on the back of healthy NIM of 3.70%.
 NPA improved as Gross NPA and Net NPA decreased 3 bps and 7 bps
sequentially to 1.87% and 1.00%, respectively. PCR also improved by 28 bps
q-o-q and stood at 77.07%.
Result Update:
Healthy credit growth led by mortgages and agriculture loans:
Advances grew at a healthy pace of 29% y-o-y (+8% q-o-q) to Rs 94.9 bn, mainly
driven by 42% y-o-y increased in Mortgages and 40% y-o-y increased in Agri and
Inclusive Banking. Incrementally, y-o-y growth was seen across all the segments
except SME and MSME. Notably, SME and MSME segment reported negative growth
of 5% y-o-y to Rs 13.3 bn. The proportion of SME loans in the books has been reducing
gradually to 14% of total loan book (as compared to 19% in Q3FY14) mainly on
account of the portfolio de-risking process undertaken by the Bank since June, 2012.
The loan growth in Corporate Banking was at 29% y-o-y to Rs 22.3 bn. Commercial
vehicle loan also grew at 29% y-o-y to Rs 1.9 bn led by small base effect. We expect
advances to grow at a CAGR of 25% over FY14-16E.
Advances Mix
Rs mn % of total Q3FY15 Q2FY15 Q3FY14 % QoQ % YoY
Mortgages 43 40,811 36,931 28,710 11 42
SME and MSME 14 13,287 13,190 13,987 1 ‐5
Corporate Banking 24 22,778 21,103 17,668 8 29
Agri & Incl. Banking 13 12,338 11,431 8,834 8 40
Commercial Vehicle 2 1,898 1,759 1,472 8 29
Others 4 3,796 3,517 2,945 8 29
Total 100.0 94,910 87,931 73,615 8 29
Source: Company, IndiaNivesh Research
Healthy deposits growth led by retail term deposits:
Deposits also grew at a healthy pace of 24% y-o-y (+9% q-o-q) to Rs 118.5 bn on
account of robust growth in retail term deposits. Retail term deposits grew 38%
y-o-y to Rs 70.5 bn as the bank is growing its retail term deposits faster than any
other deposits to support its faster loan growth. As a result, CASA ratio declined to
23.8% (-168 bps q-o-q) as compared to 25.46% in Q2FY15. CASA deposits grew 18%
y-o-y to Rs 28.2 bn. DCB has a healthy retail liability franchise. About 82% of total
deposit consists of retail deposits, which are steady by nature and less subject to
interest rate volatility. However, in declining interest rate scenario, it will take time
to get repriced which may create some pressure on the banks margins in coming
two or three quarters. We expect deposits to grow at a CAGR of 24% over FY14-
16E.

LINK
http://www.indianivesh.in/Admin/Upload/635572712582478750_DCB_Q3FY15%20Result%20Update.pdf