Development Credit Bank reported impressive Q4 results, beating street estimates, with a net income growth of 30 per cent and net profit growth of 10 per cent while improving asset quality as well. Speaking to Bloomberg TV India , DCB CEO and MD Murali M Natrajan says lower exposure to corporate and focus on retail and SMEs helped the bank keep NPAs under control. DCB should be able to grow its loan book by 23-25 per cent per annum and double it in 36-48 months, he said.
DCB’s Q4 numbers have turned out to be quite impressive. It has been quite a stable quarter in terms of asset quality. Can you take us through the headline numbers?
Basically, in Q4 we have had moderate slippage and very good recovery. And even if we had not sold a small part of our gross NPAs to asset reconstruction companies (ARCs), the gross NPA would have been lower than the previous quarter. In Q3, we ended with gross the NPA at 1.98 per cent of loan advances. We would have probably finished it at 1.92 per cent in Q4. We have sold about ₹58 crore worth of gross NPAs — about 37 accounts — to ARCs and there were no large-ticket bad loans in that. This helped us bring gross NPA as well as the net NPA down. All in all, our focus on not exposing our loan book to large- and mid-size corporate (our corporate exposure is only 15 per cent) and concentrate on retail, SME and agriculture has helped. So that is the strategy we have been following for past seven years and it has worked out well for us and we intend to continue following that to maintain stable portfolio quality. Apart from that, we also have a strong team for credit under-writing, analytics and in-house collections. With respect to growth, we achieved about 23-25 per cent. In March 2013, our loan book rate was about ₹6,500 crore. In three years, it has grown to ₹13,000 crore, which is double that of FY13. With the amount of investment we are making in new branches and staff, we believe that we should be able to continue to grow our book by 23-25 per cent, which means we can double it in 36-48 months without changing our strategies on retail, agri and SMEs.
As one grows, the standard loans will always throw up some slippages. I don’t even look at my restructured book. I think our restructured book is about 4-5 accounts and probably less than ₹40 crore. We resigned from corporate debt restructuring (CDR) about 5 years ago. Hence, they are not a concern for DCB Bank at all. We limit our exposure to corporates and that helps us manage the loans.
There was some pain contributed by the corporate as well retail and SME accounts. How has that been in this quarter?
Consistently, if you look at the opening balance of our advances, our slippage ratio has been in the range of 2-2.1 per cent. Slippages may be higher in some quarter and lower in some quarter. But overall that is the ratio we have maintained. Last year, it may have been 1.7 per cent. But you need to understand that we are dealing in a tough market scenario. At any point of time, even though our corporate book is very small, there has been may be one or two stress points in terms of commodity loans. But we are confident that we will be able to control the NPAs while going forward in achieving a growth rate of 20-23 per cent.
After a strong monsoon forecast by IMD, how is the agriculture portfolio shaping up in the next few quarters?
We created an agri–inclusive banking division seven years ago because we wanted to make sure two things — one, to achieve priority-sector lending target consistently and two, to capitalise on the opportunities thrown up by semi–urban and rural areas.