 "Accumulated losses of DCB Bank will be entirely absorbed by March 2015: Murali M Natrajan")
DCB Bank's third quarter (October-December) net profit increased by 17 per cent from a year earlier to Rs 43 crore, aided by better margins, improved asset quality and growth in advances. The bank's MD & CEO Murali M Natrajan, in an interview with Somasroy Chakraborty, said the lender was confident of absorbing its accumulated losses entirely by the end of March. Edited excerpts:
What is your outlook on the bank's earnings ?
According to our estimates, we will absorb all accumulated losses by March. At the beginning of this financial year, we had Rs 138 crore of accumulated losses.
Your provisions have increased despite improvement in NPA (non-performing asset) ratios. Why?
As a bank, we have always been making adequate provisions. The size of our asset book has increased, which has led to the increase in provisions. It is not necessarily because of stress, but more from a prudence point of view.
How is the credit quality?
We have been able to restrict fresh slippages. During the quarter, fresh slippages were around Rs 22 crore. We also had recoveries and upgradation of Rs 12 crore. Both gross and net NPA ratios have improved to 1.87 per cent and one per cent, respectively. We are confident of the quality of our retail mortgages, SME-MSME (small and medium enterprises-micro, small and medium enterprises) and agri-inclusive banking portfolios. On the corporate side, unless the external environment improves, there could still be some challenges.
Despite muted loan demand, your advances increased by 29 per cent.
We have a small base. Also, we have been opening new branches (42 branches opened in the last 15 months) and increasing our headcount (around 800 employees added since September 2013). These have helped in growing both our advances as well as deposits. Currently, around 40 per cent of our loans are in retail mortgages, 15-20 per cent in SME-MSME, 14-18 per in agri inclusive and 20-25 per cent in corporates. We will continue to maintain this mix going forward.
Your Casa ratio has dipped by 100 basis points to 23.8 per cent. Do you plan to re-price your savings deposits?
Casa (current account savings account) ratio has declined because our balance sheet growth has been faster than Casa deposits. Our customer deposits have increased by 37 per cent and as a result the share of Casa in total deposits has come down. But there is still growth in our Casa deposits, around 18 per cent. We expect the Casa ratio to return to 25 per cent in the next three years. As of now, we do not plan to re-price our savings deposits.
What is your outlook on the bank's earnings ?
According to our estimates, we will absorb all accumulated losses by March. At the beginning of this financial year, we had Rs 138 crore of accumulated losses.
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Now, only Rs 16-17 crore is left, which we believe will be absorbed by the end of this financial year. Hence, the full impact of taxation (on our earnings) will start from next year.
Your provisions have increased despite improvement in NPA (non-performing asset) ratios. Why?
As a bank, we have always been making adequate provisions. The size of our asset book has increased, which has led to the increase in provisions. It is not necessarily because of stress, but more from a prudence point of view.
How is the credit quality?
We have been able to restrict fresh slippages. During the quarter, fresh slippages were around Rs 22 crore. We also had recoveries and upgradation of Rs 12 crore. Both gross and net NPA ratios have improved to 1.87 per cent and one per cent, respectively. We are confident of the quality of our retail mortgages, SME-MSME (small and medium enterprises-micro, small and medium enterprises) and agri-inclusive banking portfolios. On the corporate side, unless the external environment improves, there could still be some challenges.
Despite muted loan demand, your advances increased by 29 per cent.
We have a small base. Also, we have been opening new branches (42 branches opened in the last 15 months) and increasing our headcount (around 800 employees added since September 2013). These have helped in growing both our advances as well as deposits. Currently, around 40 per cent of our loans are in retail mortgages, 15-20 per cent in SME-MSME, 14-18 per in agri inclusive and 20-25 per cent in corporates. We will continue to maintain this mix going forward.
Your Casa ratio has dipped by 100 basis points to 23.8 per cent. Do you plan to re-price your savings deposits?
Casa (current account savings account) ratio has declined because our balance sheet growth has been faster than Casa deposits. Our customer deposits have increased by 37 per cent and as a result the share of Casa in total deposits has come down. But there is still growth in our Casa deposits, around 18 per cent. We expect the Casa ratio to return to 25 per cent in the next three years. As of now, we do not plan to re-price our savings deposits.