DCB Posts Robust March Quarter 2012 Performance

The Development Credit Bank has kick-started the earning season among the banking players. It has announced the results of the March quarter as well as of the full financial year 2011-12. The bank posted robust numbers on Friday post the closing of the market and today the scrip is trading higher by 3 per cent at Rs 49.50. For the March quarter its profit increased by 52 per cent to Rs 17.27 crore while for FY12 its profit jumped by 157 per cent to Rs 55 crore. The following table shows the performance of the bank during the financial year.

The total income of the bank increased by 26 per cent to Rs 819 crore while the total expenditure increased by 31 per cent to Rs 735 crore. This was due to the high interest rate regime which led the bank’s interest expense to increase by 41 per cent. The net interest income (NII), which is the difference of interest income earned and the interest expended, increased by 20 per cent to Rs 228 crore for FY12.

Due to higher expenditure the operating profit of the bank decreased by 2.59 per cent. Despite posting de-growth in its operating profit the bank was able to post good profit after tax on the back of lower provisioning. As of March 31 to December 31, 2012 the deposits increased by 13 per cent to Rs 6,336 crore. The retail deposits continued to show good results at 84.4 per cent of the total deposits as against 81.2 per cent in a similar period last year. Further, in the same segment the term deposits (fixed deposits) grew at a higher rate on account of the higher interest rate offered by the bank. 

On the other hand, its CASA ratio saw a steep decline of 310 basis points to 32.1 per cent while the advances of the bank grew by 23 per cent to Rs 5,284 crore for the year 2011-12, which is above the RBI projection of 16 per cent. One should note that even during this period of slow economic growth, the bank has been able to lend and grow at a healthy pace.

The high interest rate regime has affected the bank’s net interest margin (NIM) which decreased marginally by 3 basis points to 3.12 per cent. As on March 31, 2012, the bank maintained a good capital adequacy ratio (CAR) at 15.41 per cent while the Tier 1 CAR stood at 13.81 per cent. It is very commendable that when a majority of the banks are facing headwinds when it comes to NPAs, DCB has been posting good asset quality. The net NPAs of the bank decreased by 39 basis points to 0.57 per cent while its gross NPAs decreased by 145 basis points to 4.4 per cent.  Further, the bank’s provision coverage ratio (PCR) increased by 353 basis points to 91.17 per cent, which is one of the best in the industry.

With lower NPAs and better PCR it shows that the bank is in decent shape and the quality of lending is also good. The retail segment of the bank performed well as compared to corporate and treasury. Its revenue from retail increased by 30 per cent to Rs 161 crore while the profit from this segment increased by 105 per cent to Rs 12 crore. Nasser Munjee, Chairman, DCB, stated, “We are pleased with the performance of the bank but we have to continue to be cautious as the environment poses many challenges and weaknesses.” Overall we believe that the bank has posted good performance for the quarter as well as the financial year. We would advise investors to invest in a staggering manner in the scrip to garner better returns.