You are here: Home » News-CM » Equities » Hot Pursuit
Business Standard

DCB Bank says ICRA reaffirms ratings

Capital Market 

ICRA has reaffirmed the credit ratings on DCB Bank's Basel III compliant Tier II bonds programme of Rs 550 crore at '[ICRA] A+ (hyb)' with a stable outlook.

ICRA also reaffirmed "[ICRA] A1+" rating on the bank's short-term fixed deposit programme.

The credit ratings agency said that the ratings reaffirmation factors in the continued improvement in DCB Bank's liability profile with the increasing share of granular deposits and a corresponding decline in depositor concentration levels.

While the capitalisation profile remains comfortable with the Tier I at 14.3% as on 31 December 2020, the monitorable book (overdue loans and standard restructured) remains meaningfully large in relation to the core capital given the steady build-up in the overdue loan portfolio in the higher delinquency buckets because of the COVID-19 pandemic. The extent to which the asset quality will be impacted by the higher delinquencies will remain dependent on DCB Bank's ability to improve the recovery trends in future.

DCB Bank's cost profile remains comparatively weaker, which is reflected by the higher cost of funds and low noninterest income with the same translating into a relatively higher cost-to-income ratio in relation to the private sector banks' (PVB) average. An improvement in the cost metrics will also improve DCB Bank's ability improve the overall return on asset (RoA) levels.

However, given the expectation of asset quality pressure in the near term, ability of the bank to improve recoveries/upgrades will drive credit cost and the overall profitability, in absence of which RoA is likely to remain at sub-optimal levels in FY2021 and FY2022.

The stable outlook on the rating reflects that the bank will be able to reduce its overdue loan book by taking corrective actions and will keep the solvency (net non-performing loans/core capital) level above the negative rating triggers.

DCB Bank is a private sector bank with a network of 347 branches as on 31 December 2020.

The scrip fell 1.84% to Rs 534.50 on Friday.

Powered by Capital Market - Live News

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sat, February 27 2021. 15:32 IST
RECOMMENDED FOR YOU
RECOMMENDED FOR YOU