Buy DCB Bank: target of Rs 270: ICICI Securities

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Loan growth: DCB Bank's loan growth remains strong at 21% YoY, driven by gold loans and corporates, with mortgage growth expected to pick up.
  • NIM expansion: Despite a 10bps QoQ decline in NIM to 3.25%, the bank expects improvement in H2FY27 due to surplus liquidity consumption and policy rate support.
  • Asset quality: Slippages remain stable, with a marginal increase to 2.9%, and credit costs are muted at 28bps.
  • Capital raise: The bank plans to raise equity capital sooner than later, which is expected to support its growth plans.

Thesis Validation Checklist

  • Mortgage growth: Watch for mortgage growth to pick up, driven by the bank's strategy to increase its mortgage mix and the expected improvement in the repo rate cycle.
  • NIM improvement: Monitor NIM trends, as the bank expects improvement in H2FY27, which could be driven by surplus liquidity consumption and policy rate support.
  • Asset quality: Track slippages and credit costs, as the bank's asset quality remains stable, with a marginal increase in slippages.
  • Capital raise: Look out for the bank's capital raise plans, which are expected to support its growth plans and improve its capital position.