DCB Bank - Steady performer

DCB Bank (DBL) is a midcap private sector bank with network of 333 branches and loan book of Rs186bn based in Mumbai, with presence across Retail, Agri, MSME and Corporate split is 52%, 17%, 12% and 19%, respectively.

On Basel III basis, 79% of Retail and Corporate assets comprise Retail. DCB Bank has displayed a loan CAGR of 125% over FY12-17.

DCB Bank has a CASA ratio of 25.7% and its cost of funds is 6.4% and, as a result, it registered a net interest margin of 4.1%. Its cost to income ratio stood at 62.3%. Consequently, it delivered a return on assets of 0.9% and a return on equity of 9.3%****, implying a financial leverage of 10.8.

MCAP - 7114 cr
CMP - 230
ROCE - 7.61
ROE - 11
P/BV - 2.28

Growth Trends: 10Yr 7Yr 5Yr 3Yr TTM
Sales Growth 23% 23% 22% 21% 0%
OPM 66% 67% 67% 67% 67%
PAT Growth -217% 29% 17% 19% 0%
Avg. PE 19.2 17.5 18.1 20.2 21.9

Management plans to double its balance sheet size in the next 3.5-5 years.


ROE declined during branch addition -


Most retailised mid cap bank on asset side –


Loan yield highest amongst peers below City union bank –


Higher loan yield also translates into higher net interest margin –


Well diversified and no high concentration risk to one big loan account going NPA.


PAN India approach and well diversified branches -


DBL already had a reasonably balanced branch distribution back in FY14, but it actively added branches in a manner whose by-product is the reduction of branch share in its then top region (western region) from 42% (as of FY14-end) to 29% as of end-February 2018.

As a result, DBL’s exposure to its top region (now, northern region) is 31% compared with 44-96% for mid-cap peers . This underlines the balanced, pan-India approach of DBL, which augurs well from a long-term scalability perspective.


Regulatory regime providing significant incremental fillip for bank lending to MSME segment, on which DBL is most focused

Formalisation of MSME segment due to GST increases the opportunity size for bank

Lending With the advent of GST regime and the ongoing formalisation of the MSME segment , a rising quantum of MSME business would be backed by formal documentation, which directly enhances the opportunity size in favour of MSME-focused banks such as DBL, diverting business away, on balance, from NBFCs disbursing loans to the MSME segment.


DBL’s credit exposure to the most stressed sectors of the Indian economy, viz. metals and Infrastructure, stood at 2.5% of total funded credit as of 1HFY18-end compared with 4.2%-27.6% for mid-cap peers. In fact, DBL is not disbursing any major new loans to the infrastructure sector.





Financials snapshot below –



Key Risks –

  1. Loan book stress due to loan against property business. It is known that large-ticket loan against property (LAP) business has undergone stress at an industry level due to dilution of underwriting standards on the back of hyper-competition. DCB presents highest underwriting skills till date.
  2. Proportion of corporate loans is kept within a band - Corporate loans are 17% of total loan book and management intends to keep the proportion similar going forward. This could be somewhat negative from a scalability perspective.
  3. High interest rates.
  4. Decline in GDP growth.

Views invited.

Disc - 10% of my portfolio, invested since 2017.
Please note that I am not an investment advisor. This post is for information purpose only. Please do due diligence before taking investment decisions.

Sources -



Brilliant analysis, thanks for sharing!

Aga Khan Foundation for Economic Development (AKFED) is the Promoter of DCB Bank with 15% holding. The Promoter group’s one more company named Habib Bank was fined a whopping $630 million (over ₹4,000 crore) by the US banking regulator for money laundering activities.
However there was no impact observed on DCB Bank after that. But one needs to be cautious here.


Yes there was nothing from regulator on this. Still it’s an issue which needs to be kept in mind before investment. This bank is doing very well amongst mid sized banks. Management is executing their plans well and it’s till now yielded good results. Need to track how they do going forward.

DCB bank in the exclusion list from FNO from next month. Will this have any impact ?
In my view its good bcos now only positional trading would happen based on growth.

DCB bank is slow but consistent performer. The bank has stable CASA ratio. The uptick in profitability will come from:

  1. NIM expansion through new business as bank plans to double the balance sheet in next 3 years.
  2. Reduction in cost ratio, their aim is to reach City Union Bank levels of efficiency.

The stock can generate decent returns over a long period of time. SIP per month directly in stocks will be my preferred way of investment.

Disclosure: Vested interest and biased views

1 Like

Aga Khan Foundation is the same group who was behind building of HDFC / GRUH. Nasser Munjee Chairman of DCB Bank was also with HDFC in initial days.
Aga khan reducing his holding. It is high probability that HDFC / Kotak or some other Indian private bank could buy Aga Khan stack in future (https://www.chanakyanipothi.com/hdfc-bank-to-merge-with-dcb-bank/)
I like DCB’s conservative loan book growth. Instead focusing wholesale lending/corporate lending, DCB loan book is very granuals. Also, good control on NPA and Cost to Income ratio.

Dis: 10% PF bought at@68 bought when there was blood on street when DCB announced aggressive branch expansion strategy in year 2016 and market did not like it!!


Q4 investor presentation

1 Like

Understanding the Banking Sector by Ashish Kila (CIO, Perfect Research) at Best Ideas 2019 (MOI Global)

His idea is DCB bank. Good analysis about business outlook, management focus and long term focus.

Video below.

Source - http://perfectresearch.blogspot.com/


The bank’s loan growth of 13 per cent year-on-year (YoY) in Q1FY19 was the slowest in the past five years. The gross non-performing assets (NPAs) ratio - bad loans as a percentage of gross advances - rose to 1.96 per cent against 1.86 per cent in the year-ago quarter. Net NPA expanded to 0.81 per cent during June quarter as compared to 0.72 per cent in the corresponding quarter last year.
The bank’s net interest margins (NIMs) were under pressure and declined 0.23 bps YoY and 11 bps QoQ to 3.67 per cent in Q1FY20 led by rise in cost of funds and muted loan growth.
Q1FY20 saw higher slippages (2.5 per cent annualized) largely due to agri (AIB) and CV portofolio where the bank has been relentlessly pursuing recoveries and collections. With its share of secured lending north of 90 per cent, analysts at SBICAP Securities expect DCB to sustain its superior asset quality and lower credit costs.

Update: HDFC Security Report
DCB Bank - 1QFY 20 - HDFC sec-201907170904293943190.pdf (490.7 KB)


I think the price fall in DCB today is an overreaction and the performance is one off , given the track record the bank Displayed over the last several quarters.


The result is average. Main issue is NIM contraction which was due to increase in deposit rates. Deposit rates will average out and NIM should be back to around 3.8-4 levels. Rest other parameters are okay. It’s not a high growth bank hence growth of 16% is reasonable.

Attaching capitalmind notes here which reflects well on the result.

DCB Bank_ What Was The 16 Fall About Capitalmind - Better Investing.pdf (291.7 KB)


Concall attached.

DCB_Bank_Q1FY20_Earnings_Call_Recording_16July2019.pdf (392.4 KB)

Management has also highlighted risk of increased corporate slippages in the
coming quarters as per IDBI Cap.



Sharp fall may be bec’ its over priced already.

1 Like

Invester presentation Q2 FY20


Result declared. Npa increased

They have paid 35% tax. Why not less i.e. 25% ?

This is due to DTA reversal of 25 Cr. Effective rate expected going forward is 25.75%, applicable from next quarter. Source: 2QFY20 Concall

1 Like

DCB Bank Q2FY20 Earnings Call Highlights:


  • Perfect Research
  • Anived PMS
  • Unifi Capital
  • HDFC Securities
  • ICICI Securities
  • Pi Square
  • Centrum
  • Reliance Securities
  • B&K Securities

Business Overview:

  • NII at Rs 313 crore vs Rs 282 crore YoY
  • NIM at 3.67%
  • Non-interest income at Rs 101 crore vs Rs 73 crore YoY
  • PAT at Rs 91 crore vs Rs 73 crore YoY
  • Cost to income ratio at 55.51% vs 58.88% YoY
  • GNPA at 2.09% vs 1.96% QoQ
  • NNPA at 0.96% vs 0.81% QoQ

ConCall highlights:

  • Total deposit from top 20 depositors reduced to 8.97%; bank is targeting to reduce it down to below 5% in next five years
  • Underlying fee income increased by 10-12%. Currently fee income is around 0.85-9% of total assets and bank is working to take it to 1.1-1.15% in next few quarters
  • During this quarter bank has subscribed low yielding RIDF bond to meet PSL guidelines
  • Cost of fund remain at same level as it was in Q1 despite challenging environment
  • Bank is aiming to reach NIM of 370-375 bps
  • Cost to average assets for the quarter was 2.5%; management is hopeful that it will come down to 2.2-2.25% in next two years
  • DCB currently offering FD rate of up to 8%, but it will reduce it by 25 bps in next two months
  • There is no stress in DCB’s NBFC portfolio
  • Commercial Vehicle (CV) portfolio is facing some headwinds as customers are unable to pay full installments. The bank is not taking over their vehicles since that will stop the installment from customers
  • CV portfolio comprises 7% of total portfolio
  • New vehicle is facing more challenges compared to older vehicle
  • In corporate loan portfolio 80% book is below Rs 3 crore
  • Recovery rate is around 60-65% for the trailing two quarters and 70% for the trailing four quarters. Recovery during the quarter was Rs 80 crore
  • Most of the inter-bank deposits is with co-operative banks
  • Tax rate for the quarter was high as bank had Rs 25 crore worth of deferred tax assets; going forward tax rate will be in the range of 25.7-26%
  • Total restructured standard book at the end of this quarter at Rs 40 crore
  • Abu Dhabi Commercial Bank’s (ADCB) book is not included in balance sheet as the transactions concluded in the first week of October
  • ADCB: Deposits at Rs 700-800 crore (approx 20% is CASA) and Advances at Rs 300-400 crore (mostly corporate book)
  • Total provision for the quarter was Rs 43 crore. Breakup of provision: NPA- Rs 35 crore; Standard – Rs 7 crore and for Investment Rs 1 crore
  • Construction finance book is around 3-4%; ticket size is mostly below Rs 5 crore


DCB to open 15 branches in next two quarters