MOSL: DCB BANK (Upgrade to Buy)-Stable credit cost and controlled opex to be key earnings driver
DCB Bank: Stable credit cost and controlled opex to be key earnings driver
(DCBB IN, Mkt Cap USD0.9b, CMP INR202, TP INR250, 23% Upside, Upgrade to Buy)
- PAT grew 50% YoY to INR963m (our estimate: INR928m) in 4QFY19, driven by a moderation in opex and lower provisions (-10%/13% YoY/QoQ). PPoP grew 31% YoY to INR1,853m (in-line), largely due to higher other income (+17% YoY) and controlled opex (+4% YoY). For FY19, NII grew 25% (well ahead of loan growth), PPoP increased 23% YoY, while PAT rose 33% YoY to INR3.3b.
- Opex growth moderated to 3.9% YoY (flat QoQ) to INR2.1b, aided by slower branch addition and improved productivity. C/I ratio, thus, declined 152bp QoQ to 53.7%. For FY19, CI ratio was down by 292bp to 56.9%.
- Loan book grew by 15.9%/3.0% YoY/QoQ (v/s +23.1%/3.7% in 3QFY19) to INR235.7b, primarily led by AIB (+29% YoY), MSME (+16% YoY) and mortgage (+16% YoY) segments. Corporate advances declined 11% YoY/QoQ due to repayment of some short-tenor loans.
- Deposits grew 18.4%/3.4% YoY/QoQ to INR284.3b, with retail term deposits plus CASA forming ~79% of total deposits.
- Absolute slippages declined to INR814m (1.6% v/s 2.5% in 3Q). Further, healthy recoveries and upgrades at INR667m led to a 1.3% QoQ decrease in GNPA to INR4.4b. NNPA declined 5.9% QoQ to INR1.6b, while the bank shored up its calculated PCR to 65% (63% in 3Q). GNPA/NNPA ratio declined 8bp/6bp QoQ to 1.84%/0.65%. SR book stood at INR380m (INR483m in 3QFY19) as the bank recovered INR100m from the ARC.
DCB Bank Limited is a scheduled commercial bank. The Bank's segments include Treasury Operations, Corporate/Wholesale Banking, Retail Banking and Other Banking Operations. The Treasury Operations segment includes all financial markets activities undertaken on behalf of the Bank's customers, trading, maintenance of reserve requirements and resource mobilization from other banks and financial institutions. The Corporate/Wholesale Banking segment includes lending, deposit taking and other services offered to corporate customers. The Retail Banking segment includes lending, deposit taking and other services offered to retail customers. The Other Banking Operations segment includes para banking activities like third party product distribution, merchant banking. The Bank has approximately 200 branches and approximately 410 automated teller machine (ATM) centers.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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