MOSL: DCB BANK (Neutral)-In-line earnings, margins continue moderating

DCB Bank: In-line earnings, margins continue moderating

(DCBB IN, Mkt Cap USD0.7b, CMP INR160, TP INR170, 6% Upside, Neutral)

• DCBB reported in-line PAT of INR734m, driven by moderation in opex and provisions. PPoP growth of 17% YoY came in below our estimate due to a 12% decline in other income. NIM shrank by 7bp YoY due to a 14bp decline in yield on advances. Our full-year estimate suggests DCBB should deliver PAT of INR1.5b in 2HFY19 (after INR1.4b in 1HFY19).
• Strong growth in AIB (+42%), MSME (+27%) and Corporate (+12%) books led to 4%/27% QoQ/YoY growth in the loan book to INR220.7b. Other smaller categories such as CV (+78%), Gold (+27%) and Construction Finance (+27%) also exhibited strong growth, while Mortgages grew at a marginally slower rate of 21% YoY. Deposits grew by 27% YoY (+4.5% QoQ) to INR261.7b.
• Opex declined 11% YoY to INR2.1b, largely due to the reduced pace of branch addition, leading to a decline in the C/I ratio to 59%. Provisions also declined 5.5% YoY to INR319m.
• Slippages came in at INR978m (2.2% v/s 2.6% in 1Q). Healthy recoveries and upgrades of INR700m led to a 2.3% QoQ increase in GNPA to INR4.1b. NNPA remained largely stable at INR1.55b, while the bank shored up its calculated PCR to 62.1% (61.6% in 1Q). GNPA/NNPA ratios declined by 2bp QoQ to 1.84%/0.70%.