Earnings Outlook
DCB Bank PAT seen up 10.5% YoY on robust growth in loans
This story was originally published at 21:35 IST on 21 October 2024
Register to read our real-time news.Informist, Monday, Oct. 21, 2024
By Sourabh Kumar
MUMBAI – DCB Bank Ltd.'s net profit is likely to grow 10.5% in Jul-Sept to INR 1.40 billion, primarily due to robust growth in advances, according to the average of estimates from 12 brokerage firms. Sequentially, the net profit is seen rising 6.6%. Some brokerage firms estimated the bank's advances to grow around 18-19% in the quarter ended Sept. In Apr-Jun, the bank reported a net profit of INR 1.31 billion. The bank is scheduled to declare its earnings Thursday.
Further, in the latest quarter ended Sept. the bank's net interest income likely grew almost 9% on year to INR 5.18 billion. Sequentially, net interest income of the bank was seen growing 4.4%. "NII (net interest income) growth will be in line with average loan growth as the rise in yield on advances to be in tandem with rise in cost of deposits," Yes Securities (India) Ltd said in its report. "Sequential loan growth will be in the 4.5% ballpark due to idiosyncratic growth trajectory."
While brokerage firms see the bank's net profit to rise both yearly and sequentially, it may have come under pressure due to a fall in the net interest margin during the reporting quarter. For the quarter ended Sept., three brokerage firms provided their on-year forecast for the bank's net interest margin, with all of them estimating a fall. Kotak Institutional Equities expects the bank's net interest margin to have fallen 24 basis points in Jul-Sept, and Prabhudas Lilladher Pvt. Ltd. and Emkay Global estimate a fall of 31 bps, and 32 bps, respectively.
However, brokerages expect the net interest margin to improve slightly on quarterly basis. "NIMs likely to remain flattish QoQ, with the possibility of slight improvement," Axis Securities Ltd. said in a report.
In Apr-Jun, the bank had missed street estimates for net profit, as its expenses had broadly risen at a similar pace to its total income. For the quarter ended Sept., Axis Securities sees the bank’s "opex (operating expenditure) growth gradually coming off". However, it forecast the "opex (operating expenditure) ratios to remain elevated on muted non-interest income growth."
In terms of credit cost of the bank, Axis Securities expect it be stable, sequentially. However, Prabhudas Lilladher, expect the credit cost of the bank to have risen 5 bps in the quarter ended Sept.
Asset quality of the private sector bank is expected to be stable. Kotak Institutional Equities said, "We expect asset quality to show stable trends, with slippages at around 3%, and mostly from retail loans and erstwhile restructured loans."
The gross non-performing assets ratio as of Jun 30 was at 3.33%. The net non-performing assets ratio was 1.18% as of Jun 30. Fresh slippages of the bank were 3.72 bln rupees in Apr-Jun.
Further, Emkay Global showed concerns around the bank's slippages, and, therefore, did not see any substantial rise in the net profit of the private sector lender on a quarterly basis. "Higher NPAs to keep earnings in check while slippages to remain elevated due to higher stress in retail loans," Emkay Global said.
With the bank undergoing significant reshuffle at the senior management level in July investors as well as analysts would keep an eye on the change in the growth strategy of the private sector bank. Monday, shares of DCB Bank closed 0.5% down at INR 114.00 on the National Stock Exchange.
Following are the Jul-Sept earnings estimates for DCB Bank based on estimates compiled by Informist from 12 brokerage firms:
Brokerages | NET INTEREST INCOME (in INR million) | NET PROFIT (in INR million) |
Anand Rathi Share and Stock Brokers Ltd | 5,098.00 | 1,427.00 |
Antique Stock Broking Ltd | 5,385.00 | 1,435.00 |
Axis Securities Ltd | 5,200.00 | 1,400.00 |
Dolat Capital Market Pvt Ltd | 5,249.00 | 1,629.00 |
Elara Securities (India) Pvt Ltd | 5,130.00 | 1,416.00 |
Emkay Global Financial Services Ltd | 5,102.00 | 1,313.00 |
IDBI Capital Market Services Ltd | 5,071.00 | 1,340.00 |
Kotak Institutional Equities | 5,185.00 | 1,395.00 |
Motilal Oswal Financial Services Ltd | 5,203.00 | 1,350.00 |
Nirmal Bang Equities Pvt Ltd | 5,176.00 | 1,333.00 |
Prabhudas Lilladher Pvt Ltd | 5,251.00 | 1,396.00 |
YES Securities (India) Ltd | 5,164.00 | 1,373.00 |
Average | 5,184.50 | 1,400.58 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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