MOSL: DCB BANK (Neutral)-Income beat offset by elevated opex; advances growth picks up

DCB Bank: Income beat offset by elevated opex; advances growth picks up

(DCBB IN, Mkt Cap USD0.9b, CMP INR184, TP INR188, 2% Upside, Neutral)

•  DCB Bank (DCBB) reported PPoP growth of 12% YoY (1% above estimate), as 8% beat on total income was offset by 23% growth in opex. NII growth of 20% YoY was led by 17bp expansion in reported NIM, while other income grew 17% YoY (core fee income increased 41% YoY).
• However, total income growth trailed opex growth (+20% YoY adjusted for INR50m of bond issue-related expenses). Adjusted for the one-off expense, the CI ratio stood at 60.8% compared to 60.3% in 2Q and 57.2% in 1Q. Provisions at INR343m (+12% YoY) were 4% below estimate, while higher-than-expected taxes resulted in PAT of INR570m (+11% YoY, 5% miss).
• Strong growth in corporate (+35%), MSME (+39%) and AIB (+28%) books led to 7%/28% QoQ/YoY growth in loan book to INR186b. Other smaller categories such as CV/CE (+59%), gold (+28%) and construction finance (+91%) also showed strong growth.
• Elevated slippages of INR1b (2.8%) were led by one restructured corporate account and a 9% sequential increase in LAP GNPA. Healthy recoveries and upgrades at INR576m led to a 12% QoQ increase in GNPA to INR3.5b. NNPA increased 3% QoQ to INR1.6b, reflecting a 410bp increase in PCR to 54.3%. GNPA/NNPA (%) increased 9bp/-3bp to 1.89%/0.87%.
• Other highlights: a) CASA ratio was largely flat QoQ at 26%. b) Tier I ratio stood at 12.54%, with CAR of 15.77%. c) During the quarter, the bank raised INR3b of Tier II bonds.