DCB Bank Q1 Results Review - One-Offs, Higher Opex Drag Down Earnings: Motilal Oswal

Motilal Oswal Report

DCB Bank Ltd. reported 3.5% YoY decline in profit after tax to Rs 1.3 billion (7% miss) in Q1 FY25, due to lower net interest income and higher opex.  Net interest income grew 5.5% YoY to Rs 4.97 billion (6% miss). NIMs moderated 23 bp QoQ to 3.39%, affected by interest reversals (due to regulatory changes) and the replacement of penal interest with penal charges.

DCB Bank's advances grew 19% YoY/3.1% QoQ, supported by healthy growth in mortgages and gold loans. Deposits rose 20.2% YoY/4.7% QoQ, led by growth in term deposits. Current account and savings account mix moderated 62 bp QoQ to 25.4%.

Fresh slippages increased to Rs 3.72 billion (versus Rs 3.22 billion in Q4 FY24) due to higher slippages in mortgages. Gross /net non-performing asset ratios increased by 10 bp/7 bp QoQ to 3.33%/1.18%.

We cut our earnings estimates by 4.3%/3.8% for FY25/FY26. We estimate FY26 return on asset/return on equity at 0.93%/13.3%. Reiterate Buy with a target price of Rs 175 (based on one time FY26E adjusted book value).

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