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Dolat Capital Report
DCB Bank Ltd. reported a good set of numbers with sequentially higher net interest margin at 3.6% (+14 basis points), healthy loan growth at 5% QoQ, and lower than expected credit costs.
DCB margins benefited from lower interest reversals, re-pricing of hybrid mortgage loans to floating rates, and an increase in loan against property share.
Management reiterated its net interest margin guidance of 3.65-3.75% (3.9%/3.65% in FY23/24). Lower slippages at 2% (exculding of gold book), continued traction in fee lines, and healthy growth in current account and savings account - were other key positives.
Return ratios, however, are muted with return on asset/return on equity of 1%/13% for FY25E.
We tweak earnings estimate and maintain ‘Accumulate' rating with revised target price of Rs 165 (from Rs 155), valuing at 0.9 times FY26E adjusted book value against return on asset/return on equity of 1.1%/14%.
With credit costs at 40 bps in FY24, operating leverage remains a key lever for RoA improvement going forward.
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