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DCB Bank added five new branches during the quarter, taking FY13 additions to 10 new branches, says Nomura Equity Research in its Quick Note.
DCB (Development Credit Bank) Bank reported over 50% year-on-year earnings growth for the 11th consecutive quarter, helped by stronger NIMs, (net interest margin) steady asset quality and improved operating leverage. Net profit of Rs341 million was 18.6% higher than expected driven by an NII (net interest income) beat of 8.9%. This is according to Nomura Equity Research in a Quick Note on the bank’s performance.
DCB currently trades at 7.9x of Nomura’s FY14F EPS (earnings per share). At Nomura’s TP (target price) of Rs60, DCB would trade at 10.9x FY14F EPS of Rs5.50 for an ROA (Return on Assets) of 114bps (basis points). Nomura has recommended a ‘Buy’ rating for the share of the bank.
NIM improved 14bps quarter-on-quarter on the back of a similar improvement in 3Q benefiting from the recent capital raising. Retail deposit proportion also dropped sharply quarter-on-quarter from 83% to 77% during the quarter implying 80% of Rs8 billion movement in overall deposits to have come from addition in bulk deposits at possibly cheaper cost. NIMs are expected to remain in the 3.3%-3.4% range for FY14F, according to Nomura analysts. Non-interest income seems to have stabilized for the bank at around Rs300 million.
According to Nomura, CASA (current account-savings account) deposits increased 12% year-on-year but CASA per branch was flat at Rs242 million compared to March 2012. CASA ratio dropped 170bps quarter-on-quarter to 27.2% on pick up in term deposits to fund the robust quarter-on-quarter expansion in loan book. Nomura expects this ratio to pick up again in FY14F with addition of 10 new branches in FY13 (including three Tier-1 branches).
The key ratios of the bank reflecting its performance are given below:
The asset quality analysis for the bank is given in the table below: