Development Credit Bank Ltd Q2FY12 Result Update

8/3/2019 Development Credit Bank Ltd Q2FY12 Result Update

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: [email protected]

NG TERM INVESTMENT CALL

BUY13 October 2011

Com an Re ort | Q2FY12 Result U date

Q2FY12 Result Highlights

Development Credit Bank Ltd (DCB) delivered strong quarter, with

net profits increasing by 178% to INR 133 mn (estimates of INR 119

mn) on YoY basis. This was contributed by net interest income

growth of 27% to INR 591 mn YoY (estimates of INR 581 mn) driven

by 12% yoy growth in advances. Other income declined by 14% YoY

to INR 231 mn primarily led by 68% decline in exchange

transactions.

NIMs improved to 3.41% in Q2FY12 from 3.14% in Q2FY11 after a

140 bps rise in cost of deposits which was more than compensatedby 194 bps increase in yield on advances. Also, on sequential basis

NIMs increased from 3.10%. The deposits grew by 145 to INR 62.61

bn, however, CASA ratio declined to 33.16% from 34.57% in

Q2FY11. However, Retail Deposits (Retail CASA and Retail Term

Deposits) continued to show positive movement. Retail Deposits

were at 80.8% of Total Deposits as on Q2FY12 as against 78.7% as on

Q2FY11. DCBs advances have grown by 12% YoY driven by SME

which grew by 28% YoY to INR 163 bn. The growth in retail

advances which registers a growth of 41%, was largely driven by

35% growth in commercial vehicles loans.

The gross & net NPA in Q2FY12 stood at 5.75% & 0.97% against

7.61% & 1.86% in Q2FY11 respectively. Fresh slippages remained

under control at INR ~110 mn for the quarter. During the quarter,

banks overall provisioning declined by 53% to INR 750 mn & the

provision coverage ratio including technical write-off also remained

stable at 87.89%. The banks capital adequacy ratio for Q2FY12 was

13.10% with Tier I capital at 11.23%. Currently bank has 82 branches

& has 10 more branch licenses from RBI.

Outlook & Valuation

DCB has revamped itself since FY09 and with change in

management and business strategy we believe DCB to run on

growth trajectory going forward. We believe that with thrust on

improving NIMs, CASA ratio, better core operating income and

return ratios, DCB would be one of the fastest growing Indian banks

over next few years. We expect DCB to control its incremental

slippages and maintain NIM in the range of ~3.3% levels by FY13E.

At the CMP stock trades at 1.2x & 1.1x its FY12E & FY13 book valuerespectively. We expect return ratios to improve from hereon for the

bank i.e. RoE to reach to 9.8% in FY13E from 3.5% in FY11. Thus, we

value the bank's business at 1.6x FY13E P/BV, thereby evaluating it

at INR 64.

Industry Banking

CMP (INR) 43Target (INR) 64

52 week High/Low (INR) 76/37

Market Cap (INR MN) 8149

3M Avg. Daily Volumes 541600

P/BV FY12E 1.2x

Shareholding Pattern (%)

Promoters,

23.08%

FII, 11.67

Others, 63.32%

Institutions,

1.93%

Stock Performance

20

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100

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

DCB NSE Nifty

Performance (%)

1 Month 3 Months 1 Year

DCB -10.9% -33.5% -36.9%

NIFTY 3.1% -7.7% -16.3%* Source: Ace, Unicon Research

(INR in mn)

Particulars Actual Estimates

NII 591 581

Operating Profit 209 214

PAT 133 119* Source: Ace, Unicon Research

AnalystShweta Rane | [email protected]


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FinancialsINR in mn)

Q2 FY12 Q2 FY11 Y-o-Y Q1 FY12 Q-o-Q

Interest income 1785 1279 39.59 1616 10.43

Interest expense 1194 815 46.56 1098 8.81

Net Interest Income 591 464 27.35 519 13.87

Other Income 231 269 -14.01 234 -1.34

Total Operating income 822 733 12.17 753 9.13

Operating expenditure 614 525 16.95 588 4.35

Operating Profit 209 208 0.60 165 26.76

Operating Profit (%) 10.39 13.45 -306 bps 8.93 146 bps

Provisions 75 149 -49.53 77 -2.00PBT 133 58 127.93 88 50.91

Tax 0 11 -100.00 0 -

PAT 133 48 178.48 88 50.91

EPS (INR.) 0.67 0.24 178.31 0.44 50.91

NIMs 3.41 3.14 27bps 3.10 31bpsSource: Company, Unicon Research *Standalone


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Unicon Investment Ranking Methodology

Rating Buy Accumulate Hold Reduce Sell

Return Range >= 20% 10% to 20% -10% to 10% -10% to -20%

Development Credit Bank Ltd Q2FY12 Result Update

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