DCB post robust Q3FY12 numbers
Vidrum / 14 Jan 2012
On January 12, 2012, the Development Credit Bank (DCB) posted a strong Q3FY12 result. The net interest income (NII) of the bank increased by 22 per cent to Rs 60 crore on a YoY basis while the net profit of the bank stood at Rs 15.6 crore as against Rs 8.2 crore in the similar period last year. This is on the back of lower provisions which declined from 12.5 crore to Rs 6.9 crore. The result came in after market hours yesterday. However, the stock was up in the initial trades today at around 7 per cent but finally ended the session with an increase of 1.12 per cent to Rs 40.55. The following table gives us the bank’s key parameters.
| Particulars (Rs / Cr) | Q3FY12 | Q3FY11 |
| Net Profit | 15.6 | 8.2 |
| CASA (%) | 33.1 | 33.1 |
| NIM (%) | 3.37 | 3.13 |
| CAR (%) | 13 | 13.39 |
| Provisions | 6.9 | 12.5 |
| Gross NPA (%) | 5.67 | 7.07 |
| Net NPA (%) | 1.03 | 1.3 |
| Return on Assets (%) | 0.77 | 0.47 |
| Revenue | Profit | |||||
| Segment (Rs / Cr) | Q3FY12 | Q3FY11 | % change | Q3FY12 | Q3FY11 | % change |
| Treasury Operations | 109.04 | 76.89 | 41.81 | 6.97 | 5.02 | 38.84 |
| Retail Banking | 157.32 | 52.55 | 199.37 | 3.32 | 4.47 | -25.73 |
| Corporate Banking | 55.05 | 108.54 | -49.28 | 1.53 | -0.84 | -282.14 |
| Other Banking operations | 4.14 | 3.7 | 11.89 | 3.84 | 2.62 | 46.56 |
| Less Inter segment | -115.83 | -75.45 | 53.52 | |||
| Unallocable | -0.02 | -3.1 | ||||
| Total | 209.72 | 166.23 | 26.16 | 15.64 | 8.17 | 91.43 |
Even in the rising interest rate environment the bank’s asset quality shows an improvement, which is one of the better indicators. The gross NPAs of the bank decreased by 140 basis points to 5.67 per cent while its net NPAs decreased by 27 basis points to 1.03 per cent. As on December 31, 2011, the CASA ratio of the bank remained stable at 33.1 per cent on a YoY basis. The retail deposits of the bank continued to show a positive trend and stood at 82.9 per cent of the total deposits, which is 390 basis points higher than the similar period last year. This was on the back of higher saving interest rate offered by the bank.
The capital adequacy ratio (CAR) of the bank stood at 13 per cent as on December 31, 2011, which is 39 basis points lower when compared to last year. The Tier 1 CAR stood at 11.15 per cent. The bank has maintained its CAR which is well above the minimum requirement of 9 per cent. As on December 31, 2011, the deposits of the bank grew by 10 per cent to Rs 6,191 crore while the advances saw a growth of 9 per cent to Rs 4,306 crore on a YoY basis.
In Q3FY12 the revenue from its retail segment improved by 199 per cent to Rs 157 crore while the profit from the same declined by 25 per cent to Rs 3.32 crore. Its profit from treasury operations increased by 38 per cent to Rs 7 crore. This may be due to the softening of the government bond yield which had a positive impact on its bond portfolio.
According to media reports, CRISIL today assigned a valuation grade of 5/5 to DCB which indicates strong fundamentals. We believe that the bank’s overall performance was quite impressive and the bank is in decent shape. However, it needs to increase growth in its business (advances and deposits). In our opinion, one could invest in the scrip in a staggering manner with a long time horizon to garner better returns. Further, with the interest rate cycle reversing, this benefit will accrue in the bank’s favour in the coming quarters.
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