DCB Bank alters expansion plan after stock slide

The private sector lender has decided to double number of branches in two years; earlier, it had planned to do so in one year

Private sector lender DCB Bank (formerly known as Development Co-operative Bank) has decided to double the number of branches in two years, rather than in one year it had planned earlier.

This change comes after the beating its stock took this week. On Tuesday and Wednesday, the stock had tanked close to 31 per cent. “The management has decided to install 150+ branches in a cautious, prudent and calibrated manner over a period of 24 months (instead of 12 months),” said DCB in a filing to the BSE. It said it had redrawn the plan after getting feedback from investors, analysts and other stakeholders. At present, DCB has 160 branches.



After the revised strategy was disclosed, the markets approved and the stock ended up 3.8 per cent, closing at Rs 95.80.

“Competition is going to increase dramatically in the next one year on account of new payments banks, small finance banks being set up and also on account of existing banks increasing their expansion. So, we need to be prepared for it,” Murali Natrajan, managing director, had earlier told Business Standard.
 

The aggressive expansion plans would have led to higher expenditure and this would have put pressure on the bank's margins and led several brokerage houses to cut their earnings estimates.

For the July-September 2015 quarter, net profit was Rs 37 crore against Rs 41 crore in the corresponding period last year. It was down on account of higher provisioning and steeper tax outgo.