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Development Credit Bank (DCB)
M u t e d c r e d i t g r o w t h h ig h e r o p e x d e n t s P A T
DCB again reported a profitable quarter with PAT of | 8.8 crore which was
a disappointment as compared to estimates of | 12.1 crore resulting the
in stock taking a knock. No tax provision and in line NII led to decent
profit numbers. NPA provisions include | 3.3 crore on account of recent
RBI guidelines. Sequentially flat credit growth was unsatisfactory
considering lower base whereas the deposits surged 6.6% pushing costs
up. We expect profits to continue with 23% PAT CAGR over FY11-13E.
ƒ Zero tax provisions offset high opex and dip in NIM…
Margins dipped sequentially from 3.15% to 3.10% on account of
17% YoY deposit growth to | 5980 crore and higher savings and
term deposits rate. Also CASA dipped QoQ to 33.3% from 35.2%.
Overall cost of funds went up by 43bps whereas yield rose by just
14 bps. Also, within the segments the incremental loan book growth
came in mortgages, which now forms 30% of retail against 25%
earlier. On the other hand agriculture shed its share from 19% to
17% decreasing the book in absolute terms. Higher share of low
yielding secured book also led to yields taking a dip. Opex increased
due to increased headcount with cost/income ratio surging to 78%
from 72% sequentially. However these negatives were offset by
bank not providing on taxation on account of carry forward losses.
ƒ Asset quality came as a negative surprise…
Incremental slippages at | 35 crore was on account of 2 corporate
clients turning NPA and the same was offset by w/offs to the tune of
| 17 crore done in the quarter. This came as a negative surprise as
we expected lower NPA accretions and GNPA and NNPA to improve
faster. GNPA and NNPA ratios increased from 5.85% and 0.96% in
Q4FY11 to 5.90% and 1.19% in Q1FY12E respectively. PCR stands at
85.5% with 100% provision made for unsecured personal loans. We
expect GNPA ratio of 3.8% and NNPA ratio of 0.8% by FY13E.
V a l u a t i o n
At the CMP of | 60, DCB is trading at 1.5x its FY13E ABV. The bank’s QIP
of | 150 crore is expected to be completed by FY12 and we believe prices
to remain firm on account of the same. Also profitable growth being on
track and RoA improving from 0.5% in Q1FY12 to 0.8% by FY13E, we
maintain our valuations and target price of | 72. Investors who bought the
stock at the initiating price of | 66 should hold the stock
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Development Credit Bank (DCB)
M u t e d c r e d i t g r o w t h h ig h e r o p e x d e n t s P A T
DCB again reported a profitable quarter with PAT of | 8.8 crore which was
a disappointment as compared to estimates of | 12.1 crore resulting the
in stock taking a knock. No tax provision and in line NII led to decent
profit numbers. NPA provisions include | 3.3 crore on account of recent
RBI guidelines. Sequentially flat credit growth was unsatisfactory
considering lower base whereas the deposits surged 6.6% pushing costs
up. We expect profits to continue with 23% PAT CAGR over FY11-13E.
ƒ Zero tax provisions offset high opex and dip in NIM…
Margins dipped sequentially from 3.15% to 3.10% on account of
17% YoY deposit growth to | 5980 crore and higher savings and
term deposits rate. Also CASA dipped QoQ to 33.3% from 35.2%.
Overall cost of funds went up by 43bps whereas yield rose by just
14 bps. Also, within the segments the incremental loan book growth
came in mortgages, which now forms 30% of retail against 25%
earlier. On the other hand agriculture shed its share from 19% to
17% decreasing the book in absolute terms. Higher share of low
yielding secured book also led to yields taking a dip. Opex increased
due to increased headcount with cost/income ratio surging to 78%
from 72% sequentially. However these negatives were offset by
bank not providing on taxation on account of carry forward losses.
ƒ Asset quality came as a negative surprise…
Incremental slippages at | 35 crore was on account of 2 corporate
clients turning NPA and the same was offset by w/offs to the tune of
| 17 crore done in the quarter. This came as a negative surprise as
we expected lower NPA accretions and GNPA and NNPA to improve
faster. GNPA and NNPA ratios increased from 5.85% and 0.96% in
Q4FY11 to 5.90% and 1.19% in Q1FY12E respectively. PCR stands at
85.5% with 100% provision made for unsecured personal loans. We
expect GNPA ratio of 3.8% and NNPA ratio of 0.8% by FY13E.
V a l u a t i o n
At the CMP of | 60, DCB is trading at 1.5x its FY13E ABV. The bank’s QIP
of | 150 crore is expected to be completed by FY12 and we believe prices
to remain firm on account of the same. Also profitable growth being on
track and RoA improving from 0.5% in Q1FY12 to 0.8% by FY13E, we
maintain our valuations and target price of | 72. Investors who bought the
stock at the initiating price of | 66 should hold the stock
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