MOSL: DCB BANK (Neutral)-Robust balance sheet growth-NIM under pressure

DCB Bank: Robust balance sheet growth; NIM under pressure

(DCBB IN, Mkt Cap USD0.7b, CMP INR162, TP INR170, 5% Upside, Neutral)

• DCB Bank (DCBB) reported PPoP growth of 4% YoY – 6% below our estimate due to an NII miss of 4% (17bp QoQ contraction in the NIM due to an 8bp decline in yield on advances and a 6bp increase in cost of funds). Other income declined 3% YoY (-2% QoQ) off a high base.
• Operating cost continued declining, with cost to assets of 2.8% being the lowest in 13 quarters. Provisions of INR332m (-6% YoY) were lower than our estimate, which offset the 6% PPoP miss. Consequently, PAT of INR695m (+7% YoY) came largely in line with our estimate.
• Strong growth in AIB (+38%), MSME (+43%) and Corporate (+48%) books led to 4.5%/30.6% QoQ/YoY growth in the loan book to INR212.4b. Other smaller categories such as CV (+57%), gold (+31%) and construction finance (+31%) also showed strong growth, while mortgages grew marginally slower at 18% YoY.
• Slippages inched up to INR1.07b (2.6% v/s 2.1% in 4Q), led by elevated slippages in AIB. Healthy recoveries and upgrades at INR680m led to an 8.6% QoQ increase in GNPA to INR4.0b. However, the bank shored up its calculated PCR to 61.6% (60.2% in 4Q), leading to a 5% QoQ rise in NNPA to INR1.54b. GNPA/NNPA (%) increased 7bp/0bp to 1.86%/0.72%