DCB Bank extends rally, surges 20% in two days on heavy volumes

The bank has said the moratorium has been reduced from Rs 1,908.1 crore as on March 31, 2020, to Rs 710 crore on May 31, 2020.

Shares of DCB Bank were trading higher for the second straight day, up 7.5 per cent at Rs 85.40 on the BSE on Friday on the back of heavy volumes.

The trading volumes on the counter nearly doubled with a combined 7.57 million equity shares changing hands on the NSE and BSE till 10:02 am. In comparison, the S&P BSE Sensex was up 0.22 per cent at 34,285 points.

In the past two trading days, the stock of the private sector lender has rallied 20 per cent after the lender reported a reduction in accounts in SMA/overdue categories wherein moratorium was granted.

“The moratorium has been reduced from Rs 1,908.1 crore as on March 31, 2020, to Rs 710 crore on May 31, 2020,” the bank said in an exchange disclosure on Wednesday.

“The reduction in moratorium remains positive news for the bank despite the bank having substantial allocation towards small and medium enterprises (SME), loan against property (LAP), and unsecured retail. Furthermore, additional provisions undertaken on account of Covid-19 (Rs 63 crore) provide additional comfort”, ICICI Securities said in a note.

“The January-March quarter (Q4FY20) earnings of DCB Bank belied estimates, much in consonance with peers, owing to higher-than-expected Covid-19 provisions even as the operating performance was steady (albeit softer),” analysts at Edelweiss Securities said in result update.

In DCB Bank, concerns on asset quality will take precedence over core business performance for the foreseeable future—given its higher exposure to vulnerable segments. Significant time correction over the past 12 months implies the stock is trading at a nominally attractive valuation, the brokerage firm said.