Capitaline

Analyst Meet / AGM 18-Oct-17

Conference Call

DCB Bank

Targets to further double balance sheet in next three to three-and-half years

DCB Bank conducted a concall on 17 October 2017 to discuss financial performance for the quarter ended September 2017. Murali Natrajan - MD and CEO of the bank addressed the call:
Highlights:

The bank has doubled branches network exactly in two years, as per its plan rolled out two years ago. Most of the new branches are performing well. The bank would slow down its branch expansion to 10-12 branches per year for next two years. The branch network of the bank stood at 310 branches as on date, while expects to touch 315 branches network by end March 2018.
The bank remain cautious with respect to loan growth, while continue to be vigilant in managing credit quality. The bank would continue to focus on SME segment with ticket size below 3 crore for loans growth. It proposes to further double its balance sheet in next three to three-and-half years, while the loan mix is expected to be same.
The bank has witnessed some momentum in corporate loan book, which is mostly attributed to the lack of focus on PSU banks. However, the bank remains cautious of loan growth in corporate loan segment, while the bank proposes to maintain the corporate book at 20% of overall loan book.
In the corporate loan book, the loan ticket size stands at Rs 20-25 crore, while the bank has been adding new 20-30 corporate accounts every year.
The bank had exited commercial vehicle business in 2009, while re-entered three years back. The commercial vehicle loan book constitutes 5% of loan book, of which about 80% is eligible for priority sector loan (PSL) status.
The bank has been consistently achieving the PSL targets, while the bank is also making fee income from sale of PSL certificate.
The mortgage loan book constitutes 40-42% of loan book, which has showed some moderation in loan growth due to change in risk parameter and reduction in the ticket size to 30-35 lakh from 50-60 lakh earlier.
The fresh slippages of loan stood at Rs 77.5 crore, while the bank has made recoveries, upgradations and write-off of Rs 47.4 crore in Q2FY2018. The GNPA ratio rose marginally to 1.8%, while NNPA ratio eased to 0.90% end September 2017. The bank has witnessed some impact on asset quality from GST, RERA, demonetization, floods and farm loan waivers.
The restructured loan book of the bank stood at Rs 31 crore, comprising of 3 accounts.
The bank has been consistently recording strong margins, with the decline in cost of funds. The bank expects some pressure on margins, but expects margins to stabilize at 3.75%.
The bank has sharply reduced contingent liability of tax to Rs 19 crore from Rs 119 crore about 2-3 years back.
The bank is targeting 20% CASA deposits growth, while it expects the GST implementation to support current account deposits growth.
The outstanding floating provisions of the bank stood at Rs 50 crore end September 2017.

Targets for Q4 of FY2019

The bank targets to improve RoE to 14%, RoA to above 1% and cost-to-income ratio to 55% by exit quarter or Q4 of FY2019. B/S related.

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