Earnings Outlook
Loan growth, limited operational expense to aid DCB Bk PAT
This story was originally published at 23:10 IST on 30 July 2025
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By Kabir Sharma
MUMBAI – Healthy growth in loans and controlled operational expenditure are expected to help DCB Bank Ltd. report an on-year growth in its net profit for the quarter ended June, according to brokerages tracking the lender. However, the bank is expected to see some stress compared to the previous quarter due to a contraction in its net interest margin, they said.
The bottom line of the bank is expected to fall 21% on year to INR 1.59 billion in the reporting quarter, according to an average of estimates from 11 brokerage firms. The estimates are in the range of INR 1.41 billion to INR 1.76 billion, with JM Financial Institutional Securities Pvt. Ltd. giving the lowest estimate while IDBI Capital Market Services Ltd. gave the highest.
Shares of the bank, which lies outside the Nifty 500 index, have risen over 5.7% since the bank reported its earnings for the March quarter on Apr. 25. On Tuesday, its shares ended at INR 134.33 on the National Stock Exchange, down 1.3% from the previous close.
Bucking the industry-wide trend, the private sector lender's loan growth is seen outpacing deposit growth. "We expect operating profits to grow around 25% on year led by healthy loan growth and stable opex (operational expenditure) growth," Kotak Institutional Equities said in a note. As of Mar. 31, net advances rose 24.7% on year to INR 510.47 billion.
Brokerages expect stable growth in operating expenditure to support the bank's bottom line for the June quarter. Operating expenses of the bank were up 15% on year at INR 4.71 billion for the quarter ended March.
The net interest income of the bank is expected to remain stable compared to the trailing quarter, according to analysts. Brokerages see the core income of the bank rising 13.5% on year to INR 5.64 billion, according to an average of their estimates. The bank's Jan-Mar net interest income rose 9.8% on year to INR 5.58 billion. "NII (net interest income) growth will be slower than average loan growth due to rise in cost of deposits outpacing yield on advances. Consequently, NIM (net interest margin) will be lower sequentially," YES Securities said in a note.
Kotak Institutional Equities expects the net interest margin of the bank to decline around 10 basis points from the previous quarter to 3.20%, led by cuts in lending rates and slower re-pricing of deposits. The net interest margin for Jan-Mar was 3.29% against 3.30% in Oct-Dec and 3.62% a year ago. According to the brokerages, the 75 bps of repo rate cut by the RBI in the June quarter is expected to have weighed on the margins as the transmission to yield on advances happens faster than the deposit rates.
Provisions of the bank, which surged in the last quarter, are expected to remain elevated as stress in its prime mortgage business is expected to continue. Provisions for the March quarter had jumped nearly three-fold to INR 672.2 million from INR 240.8 million a year ago. The rise in provisions weighed on the net profit as the bank's operating profit before provisions increased 30.7% on year to INR 3.05 billion in Jan-Mar.
YES Securities expects slippages to be higher on a sequential basis due to seasonality and expects provisions to be broadly unchanged from the trailing quarter, it said. The bank reported fresh slippages of INR 3.65 billion in Jan-Mar. Consequently, the gross non-performing asset ratio and the net non-performing asset ratio are also expected to not show significant improvement. DCB Bank's gross non-performing asset ratio moderated to 2.99% as of Mar. 31 from 3.23% a year ago and 3.11% a quarter ago. The net non-performing asset ratio was 1.12% as of Mar. 31, marginally higher than 1.11% a year ago but lower than 1.18% from a quarter ago.
Analysts said the microfinance portfolio's performance, asset quality trends, and guidance on margin will be in focus. The bank will declare its Apr-Jun financials on Thursday.
Following are the Apr-Jun earnings estimates for DCB Bank based on reports from 11 broking firms in descending order of net profit:
|
Brokerage Firms |
Net Interest Income (in INR million) |
Net Profit (in INR million) |
|
IDBI Capital Market Services Ltd. |
5,723.00 |
1,757.00 |
|
Motilal Oswal Financial Services Ltd. |
5,720.00 |
1,724.00 |
|
ICICI Securities Ltd. |
5,368.00 |
1,660.00 |
|
Dolat Capital Market Pvt Ltd. |
5,553.00 |
1,633.00 |
|
Antique Stock Broking Ltd. |
5,732.00 |
1,616.00 |
|
YES Securities (India) Ltd. |
5,775.00 |
1,613.00 |
|
Anand Rathi Share and Stock Brokers Ltd. |
5,592.00 |
1,572.00 |
|
Kotak Institutional Equities |
5,735.00 |
1,525.00 |
|
Nirmal Bang Equities Ltd. |
5,606.00 |
1,520.00 |
|
Prabhudas Lilladher Ltd. |
5,692.00 |
1,435.00 |
|
JM Financial Institutional Securities Ltd. |
5,525.00 |
1,409.00 |
|
Average |
5,638.27 |
1,587.64 |
End
Edited by Tanima Banerjee
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