ANAND RATHI
DCB Bank (Buy)
CMP: Rs 46.60
While Development Credit Bank’s deposits grew 32 per cent y-o-y, its advances grew 24.6 per cent y-o-y, resulting in 28.7 per cent y-o-y business growth.
Led by the bank’s improving business growth, better productivity and stable credit costs, we raise our PAT estimates 20.6 per cent/6.8 per cent in FY14-15, supporting the Bank’s robust profitability over FY13-15. With higher-than-past business growth, the Bank’s operating leverage is likely to further improve. We estimate cost-to-assets to fall from 3.1 per cent in FY12 to 2.7 per cent in FY14 and 2.8 per cent in FY15. Risks: Higher-than-expected credit cost; change in management.