Buy DCB Bank; target of Rs 245: Motilal Oswal

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Strong other income: DCB Bank reported a 34% YoY growth in other income, driven by robust growth in core fee income and healthy treasury gains.
  • Healthy operating performance: The bank's operating performance remained healthy, with a 17% YoY growth in NII and a 26% YoY growth in PPoP.
  • Improving asset quality: The bank's asset quality improved, with a decline in GNPA and NNPA ratios, and a provision coverage ratio of ~69%.
  • Business growth: The bank's business growth remained healthy, with a 21% YoY growth in advances and a 19% YoY growth in deposits.

Thesis Validation Checklist

  • Margin expansion: NIMs are expected to expand in 3QFY27 and 4QFY27, supported by the passthrough of repo rate hikes.
  • Asset quality: The bank's asset quality is expected to remain stable, with a decline in slippages and an improvement in provision coverage ratio.
  • Business growth: The bank's business growth is expected to remain healthy, driven by an increased focus on high-yielding segments such as mortgages and gold loans.
  • Return on equity (RoE): The bank's RoE is expected to remain above 13.5% in FY27, driven by an improving NIM trajectory, controlled provisions, and enhanced operating efficiency.