Recommendation from Banking Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]

DCB Bank : GRANULAR GROWTH WITH IMPROVING PROFITABILITY

HERE IS WHY
✓ Strong Secured Loan Focus
✓ Improving Asset Quality
✓ Consistent Business Growth

India’s banking sector continues to demonstrate resilience, supported by healthy credit demand, improving asset quality and stable capital buffers. Within this landscape, small-sized private banks with niche positioning and disciplined underwriting are emerging as steady compounders. We recommend DCB Bank as our Choice Scrip.

DCB Bank is a private sector bank with a pan-India presence across 469 branches as of December 2025. Its strategy revolves around secured small-ticket lending, diversified deposits and disciplined capital allocation. Over the years, the bank has consciously limited large corporate exposures and instead strengthened its position in mortgages, MSME overdrafts, gold loans, co-lending and Construction finance.

NII for Q3FY26 stood at around ₹625 crore, with YoY growth of 15 per cent and 5 per cent QoQ. Total income stands at ₹846 crore, increased by about 16 per cent YoY and 8 per cent QoQ. PAT stood at ₹185 crore, registering a healthy 22 per cent YoY growth. Balance sheet size increased 14.35 per cent YoY to ₹ 81,840 crore.

Advances grew 18.46 per cent YoY to ₹56,600 crore, while deposits expanded 19.54 per cent YoY to ₹67,754 crore. NIM for Q3FY26 stood at 3.27 per cent, remaining within the bank’s business model range of 3.5–3.65 per cent over the cycle. Cost-to-income ratio stood at 61.84 per cent, while cost to average assets was 2.59 per cent. Gross NPA declined to 2.72 per cent in Q3FY26 from 3.11 per cent in Q3FY25. Net NPA improved to 1.10 per cent from 1.18 per cent YoY. Provision Coverage Ratio improved to 75.35 per cent. DCB Bank’s product mix remains well diversified across retail and corporate segments, reflecting a balanced growth strategy. CASA has moderated compared to previous years, as the bank has consciously reduced Reliance on bulk deposits. Capital adequacy ratio stood healthy at 15.84 per cent, providing adequate headroom for growth.

DCB Bank continues to enhance its digital footprint. UPI transactions rose to 321 lakh in Q3FY26 from 224 lakh in Q3FY25. Mobile banking financial transactions increased steadily, indicating growing customer engagement. The bank showcased multiple fintech partnerships at Global Fintech Fest 2025, reinforcing its digital-first and partnership-led approach. Strategic collaborations in payments and co-branded cards are expected to strengthen fee income generation.

DCB Bank’s management has outlined a clear and focused strategic roadmap aimed at delivering consistent and scalable growth. The bank targets doubling its balance sheet every three to four years, while maintaining Net Interest Margins (NIM) in the range of 3.5–3.65 per cent across cycles. Credit cost is expected to remain contained within 45–55 basis points, supporting steady profitability. Management is also focused on improving operating efficiency, with a goal of reducing the cost-to-income ratio below 60 per cent. Return ratios remain stable, with RoA at 0.91 per cent and RoE at 12.73 per cent for the quarter. The bank has guided for RoA of 1 per cent or higher in the near term, along with RoE targets of 13.5 per cent in FY27 and 14.5 per cent in FY28, reflecting improving profitability and scale benefits.

The bank has delivered a healthy 22.6 per cent growth in income and profit growth of 28.8 per cent over the last three years. From a valuation perspective, banks are best assessed on a price-to-book basis. DCB Bank’s P/B is around 1.03x. Considering all the factors, we recommend BUY.

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