Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DCB Bank Ltd (BOM:532772, Financial) reported a deposit growth of slightly above 20% year-on-year.
- The bank crossed the 50,000 crore total deposit mark, indicating strong liquidity.
- Loan growth was recorded at 8%, with a restructured book now at 2.34%.
- The bank has made significant technology upgrades, including a new treasury system and an upgraded SIEM system for cybersecurity.
- The cost to average assets ratio improved to 2.7% from 2.73% in the same quarter last year.
Negative Points
- There was a slight elevation in the NPL ratios, impacting the overall asset quality.
- Net Interest Margin (NIM) decreased to 3.39% this quarter.
- The provision coverage ratio stands at 76%, which may indicate a need for higher provisioning.
- The bank experienced some regulatory changes on the loans front, resulting in interest reversals.
- Operational expenses remain high, partly due to increased investments in technology and workforce.
Q & A Highlights
Q: Can you explain the reasons behind the NIM compression this quarter and how it will trend going forward?
A: The NIM compression is primarily due to the repricing of long-term term deposits at higher current rates and some regulatory changes on the loans front, including interest reversals. We expect stabilization by mid-Q3, with no significant one-offs anticipated in the future. (Praveen Kutty, Head - Retail Banking)
Q: What is the impact of the regulatory changes on your financials?
A: The regulatory changes, including the replacement of penal interest with premium charges and the accrual of loan disbursal interest from the handover date, have had a one-time impact. We expect these effects to taper off by July. (Praveen Kutty, Head - Retail Banking)
Q: How do you plan to achieve your stated ROE guidance of 13-14%?
A: We are focusing on efficient use of capital, maintaining a low risk-weighted asset ratio, and leveraging internal capital accruals. We aim for a 20% growth rate, supported by fresh capital infusion if necessary. (Praveen Kutty, Head - Retail Banking)
Q: What is your strategy for fee income growth?
A: We are driving fee income growth through third-party distribution, processing fees, and increased engagement with customers via overdraft and cost products. Our goal is to move towards 1% fee income as a percentage of total income. (Murali Natrajan, CEO)
Q: Can you provide an update on the promoter preferential issue?
A: We are in the process of submitting the required documents and expect the capital infusion to be completed by Q2. (Murali Natrajan, CEO)
Q: What is the outlook for your cost-to-average-assets ratio?
A: We aim to reduce the cost-to-average-assets ratio from 2.7% to 2.5% in the near future through increased productivity, technology investments, and a focus on higher ticket-size business loans. (Praveen Kutty, Head - Retail Banking)
Q: How are you managing the quality of your co-lending book?
A: We have near-perfect recovery from our co-lending partners and have diversified our partnerships to mitigate risks. The co-lending book remains stable at around 7.1% of total assets. (Praveen Kutty, Head - Retail Banking)
Q: What is your strategy for managing slippages and NPAs?
A: We are focusing on resolving episodic slippages in the mortgage book and maintaining a strong provision coverage ratio. We expect the impact of one-time events to diminish going forward. (Praveen Kutty, Head - Retail Banking)
Q: How do you plan to achieve your target CD ratio and manage liquidity?
A: We aim to maintain a CD ratio under 80% while ensuring strong liquidity. We are focusing on improving our liability profile by targeting individual and institutional deposits. (Praveen Kutty, Head - Retail Banking)
Q: What are the key drivers for your OpEx and cost-to-income ratio?
A: The increase in OpEx is due to investments in people and technology. We are working on improving productivity and reducing operational costs through digitization to achieve a cost-to-income ratio of 55%. (Praveen Kutty, Head - Retail Banking)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
