DCB Bank Ltd Research ReportQ3FY21

Mixed bag, wait and watch play on asset quality DCB Bank has posted mixed set of numbers overall for Q3FY21 with stable margins and controlled opex. However, asset quality has weakened, with increase in restructuring guidance and elevated credit cost expected. For the bank, headline asset quality numbers looked sanguine, as GNPA and NNPA ratio declined from 2.27% and 0.83% to 1.96% and 0.59% QoQ, respectively. This was due to standstill asset classification norms. On a proforma basis, GNPA and NNPA ratio increased 131 bps and 100 bps QoQ to 3.70% and 1.92%, respectively. The bank has restructured loans worth | 687 crore (~2.7% of loans) and further expects ~5% of loans to come-up for restructuring. During the quarter, the bank has made provisions worth | 86 crore, towards Covid related stress. As a result, it now holds provisions worth | 229 crore, towards the same. In addition to this, the bank has floating provisions worth | 106 crore. The bank overall has provision buffer of ~2% of net advances. On the collection front, the bank has seen improving trend in each segment of the portfolio, collection efficiency for LAP, home loans and CV segment were at 89.8%, 94.1% and 80.4%, respectively. There has been healthy reduction in the quantum of customer pool that did not pay single EMI. In LAP business, this quantum reduced significantly from 7.4% in October 2020 to 1.31%. In home loans it reduced from 5.4% to 1.55%.