Capitaline

Analyst Meet / AGM 17-Jan-17

Conference Call

DCB Bank

Expects cost-to-income ratio at 63% and RoE at 10% in FY2017

DCB Bank conducted a concall on 16 January 2016 to discuss financial performance for the quarter ended December 2016. Murali Natrajan - MD and CEO of the bank addressed the call:
Highlights:

The bank has posted 24% growth in its loan book to Rs 14584 crore at end December 2016, while non-corporate loan book growth was even strong at 26% to Rs 12218 crore at end December 2016.
Deposits jumped 34% to Rs 18840 crore, CASA deposits surged 51% to Rs 4871 crore. CASA ratio jumped to 25.85% at end December 2016 from 21.9% end September 2016 and 22.85% end December 2015. Most of the increase in CASA deposits was driven by small ticket accounts, which bank believes to be sticky, while bank could not share any guidance on sustainability of post demonetization surge in CASA deposits.
The share of retail CASA & retail term deposits increased to 79.4% end December 2016 from 77% end September 2016.
Bank has maintained the Net Interest Margin steady at 3.95% in Q3FY2017.
Bank has improved GNPA ratio to 1.55% and NNPA ratio to 0.74% end December 2016. Despite RBI dispensation to allow small borrowers additional 90 days for interest payment, the bank has classified such accounts allowed delayed payment is allowed as NPA and made provisions. The bank has received request for delayed payment from accounts valuing Rs 33 crore. Although, the bank has classified these accounts as NPAs, their credit history remains intact.
The restructured standard advances book of the bank remained flat at Rs 30 crore comprising of 2 accounts at end December 2016.
The bank has conducted sale of assets to asset reconstruction in Q3FY2017 with value of Rs 87 crore from NPAs and Rs 21 crore from written off accounts for the consideration of Rs 52 crore, of which 20% is received in cash and balance in Securities Receipts (SRs).
The SRs book of the bank has jumped to Rs 70 crore end December 2016 from Rs 29 crore end September 2016.
As per the bank, the SME book witnessed contraction in November 2016 due to repayment of working capital loans. SMEs have witnessed slowdown in throughput in the range of 20-30 post demonetization, while the normalcy returned from mid-December 2016 onwards.
As per the bank, the operating expenses were impacted by demonetization related expenses for security, cash transportation, additional insurance costs etc.
Average ticket size of SME book stood at Rs 40-50 lakh, while LAP/mortgage average ticket sizes stands at Rs 30-35 lakh.
The microfinance loan book comprised 5-6% of the loan book, which is mainly aimed at meeting Priority Sector Loans (PSL) targets. The bank is keeping a close watch on its microfinance loan book, post demonetization.
The fee income of the bank was impacted as processing fee income was weak due to deceleration in loan disbursals and absence of ATMs fees. Bank has targeted the core fee income growth at 16%.
The bank expects cost-to-income ratio a 63% and RoE at 10% in FY2017.
The bank plans to raise equity in August-September 2017.
The bank has continued to expand branch network adding 20 new branches in Q3FY2017 raising the branch network strength to 248 branches at end December 2016. Bank branches to add about 62 branches over next three quarters raising the branch count to 310 branches by October 2017.

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