DCB Bank Ltd (DCBBANK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to DCB Bank Limited Q2 FY '27 earnings conference call. Today, we have with us Mr. Praveen Kutty, Managing Director and Chief Executive Officer, Mr. Sridhar Seshadri, Whole-Time Director, and Mr. Ajit Kumar Singh, Chief Investor Relations Officer. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Mr. Praveen Kutty from DCB Bank Limited. Thank you, and over to you, sir.
Praveen Kutty (DCB Bank Limited): Thank you, and, good evening, everybody. Welcome to the Q2 results call. The bank continues, its growth momentum with advances growing at 21% YoY and deposits growing at 19%. In keeping with the guidance, both advances and deposits have doubled over September 2022 over the last 4 years. Our net interest income grew by 17% YoY. Over the last 1 year, the yield on advances dropped by 38 basis points, while during the same period, we reduced the cost of fund by 34 basis points. If you look at the last quarter, our yield on advances dropped by 2 basis points, while cost of funds dropped by 8 basis points. If you look at revenue, it grew by 21% YoY
Praveen Kutty (DCB Bank Limited): income continuing to be strong. And also, the focus we have on our productivity and on technology adoption is helping us in, in, in keeping our cost to average assets under control. It continues to be below 2.5%. To be precise at 2.47%. And our cost to income is at 59.64% at a 18 quarter low. During the last two years, we've grown our employee strength by 1%, our balance sheet by 34%, and our revenue by 33%. The fact that the revenue grew by 21% and cost grew by 18% YoY meant that operating profit grew by 26% YoY. The portfolio quality continues to improve with a credit cost at 0.28%. Our GNPA is at 2.29% and NNPA is at 0.73%, both of which are at a 23 quarter low. Our PCR is at 81.38%, a 7.23% improvement over the last year. And PCR excluding technical write-off is at 68.75%, a 9.6% improvement over the last year. As a consequence of all this, our net profit has risen by 29% over the year to 236 crores, which is the highest ever in a quarter. This is the fifth consecutive quarter where the bank is clocking a highest ever quarterly net profit. As a result, our ROA is at 1.03% for the quarter and 1% for the half year. Also, the ROE is 14.6% for the quarter and 14.12% for the half year. I, I just want to take you back one year into a Q2 2025 when we gave guidance of an 18% to 20% growth of cost to average assets being less than 2.5%, of GNPA also being less than 2.5%, net NPA being less than 1%, and lastly on ROE of 13.5% for this year, FY '26-'27. One year later in each of these four quarters, each of these numbers speak the story of consistency and predictability. Finally, I'd like to share with you the trend line of ROE for the last four quarters. It is 12.73%, 13.53%, 13.61%, and now 14.6%. Thank you for listening in. And operator, could you please open the lines for any questions from the audience?
Moderator: Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question comes from the line of Akshat Agarwal with Nirmal Bang Institutional Equities. Please go ahead.
Akshat Agarwal (Nirmal Bang Institutional Equities): Good evening, sir. Thanks for the opportunity and congrats on a good set of numbers. So one on the first on the first question is on cost. While the cost to income ratio and cost to average assets are tracking guidance, OPEX growth QoQ and YoY looks a bit elevated. So, is it mostly on the staff addition, branches, and a bit on technology, is it is that contributing to the increase, or are we, I mean, is there some one-offs there? And are we on track to reach 13,000 employees by year end and and adding 20 branches overall during this year? Thanks.
Praveen Kutty (DCB Bank Limited): So, on the operating cost, the increase has been the people. We are now at 12,002 people, which which is higher than what we started off the year with. So, it's the people cost that's coming in. Otherwise, it's a normal cybersecurity, tech cost, there is nothing exceptional on the on the OpEx side, and and we should expect similar
Praveen Kutty (DCB Bank Limited): trend lines to continue on the opex cost and also on the cost to average assets. So, I don't see as giving any change on that. As to a question whether we'll be 13,000 people by the end of the year, we want to be, but I don't think we'll be. So, we'll be higher than 12,000 which we are currently, but I don't think we'll reach 13,000 by the end of the end of the year. We probably will be around 12,800-12,900. That's, that's, that's what we are seeing currently.
Akshat Agarwal (Nirmal Bang Institutional Equities): Right, sir. Thanks for that. And on the NIM, sir what was the reason for the decline? QoQ, cost of fund seems to be declining, yield on advances declined by two bps. So, if we can elaborate on the key drivers of the compression and outlook for the NIM in coming quarters. Ideally, with the rate hikes, we should see expansion going forward. Is that correct? Or is there some other component that that could affect margins?
Praveen Kutty (DCB Bank Limited): So, if you look at Q4 and Q1, our advances growth was in the region of 18.5% to 18.7%, whereas deposit growth was between 20% and 21%. So, we were stockpiling liquidity post February 26, Israel-Iran war and it was a conscious strategy to have enough liquidity within. Then what happened is in August, there was a window to to garner NRI deposit which comes at a much lower cost than our normal term deposits. So, we got $194 million through the FCNR(B) window. This really increase our liquidity significantly and and that has a liquidity cost attached to it. Why you don't see a similar growth on deposit in Q2 is because usually most of the maturities come towards the last week of Q2 or last week of every quarter. So, we really went aggressively and on maturity of of the high-cost bulk deposits, we we gave up those deposits, which is why deposit growth is is at 18.6%. But, we had to carry the excess liquidity for the whole practically the whole 88 87 days of of this quarter. So, that's the cost which you have to pay and that's the reason why the the there's been a reduction in the NIM in in Q2. Going forward, you already seen the the lead indicators where the deposit growth was less. So, we're starting Q3 with with less surplus liquidity. And obviously, in November, we will be passing on the the increase in repo rate to a significant chunk of our asset customers who are on floating rate. So, that'll have an impact on NIM. We we we are confident of holding our credit cost to well below the guidance level which will also have a positive impact on NIM. So, on a go-forward basis, we we would see the NIM improving in in in Q3 and in Q4, as well, assuming even even if assumed to be no further repo rate hikes going forward.
Akshat Agarwal (Nirmal Bang Institutional Equities): Right, sir. And if you could provide some quantitative guidance like 5 to 7 bps or something like that can we expect going forward per quarter? And is there a component for continued component from home loans to LAP shift as well which was incrementally 70 to 30% last quarter?
Praveen Kutty (DCB Bank Limited): So, we are at 70:30 slightly 71:29 and we're comfortable with that. We'll be continuing with that. So, but that's on this incremental, right? So, over a period of time, the stock also changes its color. So, you get the benefit of it over over a period of time. But, the real story is is not this. The real story is about the cost of deposit. The way the cost of deposit is coming down and it's not because of CASA. It is because of the conscious strategy of not being the highest rate provider. And we managed to make 3,000 people in branch banking aware of it and still grow 18.6%, still keep the top 20 less than 7% and and that is really helping in in in in this run. Some bit also has helped in our long tenor term deposit repricing which is coming in. So, it's a combination of this. So, it's more of cost of deposits improvement that is helping the NIM in the in the in the longer term. Not not necessarily the yield growth. Of course, the repo rate increase will will have an immediate impact on the on the widening of the NIM.
110 more turns of this transcript: log in to Stocksigma to read the full call.