DCB Bank aims to double balance sheet in 3 years

DCB Bank aims to double its balance sheet size in next three to three-and-a-half years. This is despite the private sector lender avoiding large-ticket advances and being cautious in offering loans to sectors like infrastructure to preserve the quality of its assets.

“We feel there is enough opportunity in the four big business segments that we are working on — mortgages, agri inclusive banking, corporate banking and SME-MSME (micro, small and medium enterprises)... Now we are targeting to double our balance sheet in three to three-and-a-half years. This would mean loan book growth of about 23 per cent to 25 per cent,” Murali M Natrajan, managing director and chief executive officer of DCB Bank, told analysts in a recent interaction.

The bank had closed the first quarter (April-June) of this financial year with total assets of Rs 12,884 crore. Its net advances increased by 28 per cent from a year earlier to Rs 8,291 crore at the end of June, 2014.

Natrajan said the bank will continue with its strategy to de-risk its portfolio. The private sector lender had started reducing the ticket size of its SME advances to minimise credit quality risks affecting its performance. “Now it is almost two years that we do not prefer big ticket. Very rarely we do big tickets. I am not saying we do not do at all but it is more of an exception than a rule,” Natrajan said.

DCB Bank's gross non-performing asset (NPA) ratio had improved to 1.78 per cent at the end of June, 2014, from 3.41 per cent from a year ago. There were fresh slippages worth Rs 24 crore in the April-June period in the SME, retail and agri inclusive banking segments. However, the bank did not witness any corporate loan slippage during the quarter.

Natrajan said the bank was not focusing on any particular segment while growing its advances. “We are trying to make sure that we go for good companies, better security structure, better product structure, etc. So, we are not focused on any one segment and we try and avoid any infrastructure type of loans. Yes, we do have some infra loans, which have been with us for quite some years now. Other than that we just kind of avoid that segment,” he added.

He also said the bank might need fresh capital by June, 2015, to finance its business growth. The bank's board and its shareholders have already approved raising of up to Rs 300 crore via qualified institutional placement (QIP) or through preferential allotment. Natrajan said the bank might raise the capital before March, 2015, if it finds the market conditions favourable.

Natrajan said the bank was yet to hear from the Reserve Bank of India (RBI) on its representation requesting for more time to cut the promoters' stake.

“To the best of my knowledge in the last five years I have never heard from the promoter wanting to sell any part of his stake... If a QIP is raised or even preferential allotment is made and the promoters do not participate, their stake automatically get diluted,” he said.