 "DCB Bank slips 5%; stock hits 21-month low on asset quality concerns")
Shares of DCB Bank hit a 21-month low at Rs 74, down 5 per cent on the BSE in Tuesday’s intra-day trade, falling as much as 11 per cent in the past one week on assets quality concerns. The stock of private sector lender traded at its lowest level since June 2020.
In the past two weeks, the stock declined 16 per cent after the bank reported a 22 per cent year-on-year (YoY) decline in its net profit at Rs 75.37 crore for the quarter ended in December 2021 (Q3FY22). The bank's Net Interest Income (NII) rose marginally to Rs 345 crore in Q3FY22 as against Rs 335 crore in Q3FY21.
The asset quality of the bank deteriorated as gross non-performing assets rose to 4.73 per cent of the gross advances at end of December 2021 as against 1.96 per cent in the year-ago period. The net NPAs rose to 2.52 per cent in Q3FY22 from 0.59 per cent in Q3FY21. The weakening in the asset quality was partly due to the bank’s customer profile, mainly comprising small-ticket borrowers in the self-employed segment, that was more severely impacted by the pandemic.
Various regulatory and policy interventions helped contain fresh NPA generation at 2.74 per cent in FY2021. However, the annualised fresh NPA generation rate rose sharply to 7.3 per cent of standard advances in nine months (April-December) of FY2022 with the gradual withdrawal of these schemes together with the impact of the second Covid-19 wave on a book largely comprising small ticket size borrowers in the selfemployed segment.
Over and above this, the overall standard restructured book remained high at around 8 per cent of standard advances as on December 31, 2021 (net of provisions at 7 per cent), which together with the sizeable overdue book (SMA1 & SMA-2) will remain a near to medium term monitorable, ICRA said in rating rational after reaffirmed various ratings of DCB Bank.
Further, DCB’s cost profile remains relatively weak, with the cost of funds as well as the cost-to-income ratio remaining comparatively higher than the private sector banks’ (PVB) average. While the bank’s stated growth guidance of doubling the book over the next 3-4 years may help derive operational leverage over the long term, the operating expenses necessary for expanding the franchise are likely to remain high in the near term, the rating agency said. CLICK HERE FOR MORE DETAILS
In the past two weeks, the stock declined 16 per cent after the bank reported a 22 per cent year-on-year (YoY) decline in its net profit at Rs 75.37 crore for the quarter ended in December 2021 (Q3FY22). The bank's Net Interest Income (NII) rose marginally to Rs 345 crore in Q3FY22 as against Rs 335 crore in Q3FY21.
The asset quality of the bank deteriorated as gross non-performing assets rose to 4.73 per cent of the gross advances at end of December 2021 as against 1.96 per cent in the year-ago period. The net NPAs rose to 2.52 per cent in Q3FY22 from 0.59 per cent in Q3FY21. The weakening in the asset quality was partly due to the bank’s customer profile, mainly comprising small-ticket borrowers in the self-employed segment, that was more severely impacted by the pandemic.
Various regulatory and policy interventions helped contain fresh NPA generation at 2.74 per cent in FY2021. However, the annualised fresh NPA generation rate rose sharply to 7.3 per cent of standard advances in nine months (April-December) of FY2022 with the gradual withdrawal of these schemes together with the impact of the second Covid-19 wave on a book largely comprising small ticket size borrowers in the selfemployed segment.
Over and above this, the overall standard restructured book remained high at around 8 per cent of standard advances as on December 31, 2021 (net of provisions at 7 per cent), which together with the sizeable overdue book (SMA1 & SMA-2) will remain a near to medium term monitorable, ICRA said in rating rational after reaffirmed various ratings of DCB Bank.
Further, DCB’s cost profile remains relatively weak, with the cost of funds as well as the cost-to-income ratio remaining comparatively higher than the private sector banks’ (PVB) average. While the bank’s stated growth guidance of doubling the book over the next 3-4 years may help derive operational leverage over the long term, the operating expenses necessary for expanding the franchise are likely to remain high in the near term, the rating agency said. CLICK HERE FOR MORE DETAILS
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