DCB to double balance sheet size

Mumbai-based Development Credit Bank (DCB) today said it would double its balance sheet size by March 2008.

The small-sized private sector bank has been lagging in credit growth over the last couple of years owing to lack of adequate capital for growth amid the burden of non-performing assets (NPAs).

"We plan to double the balance sheet from Rs 4,400 crore as on June 30, 2006 by March 2008," said Nasser Munjee, chairman, at the listing of the scrip in Mumbai today.

The bank has raised Rs 186 crore through its initial public offer (IPO) earlier this month that has raised its capital adequacy ratio to 16.5 per cent from 9.39 per cent at the end of March 2006. The bank also plans to improve its profitability by targeting a net interest margin of 3 per cent by March 2009 from 2.47 percent in the first quarter of 2006-07, a senior bank official.

The bank will focus on current and savings bank accounts (CASA) to bring down its cost of funds, which is currently at a high of 5.4 per cent, and concentrate on high yielding SME clients and retail banking. The share of CASA increased to 32.01 per cent at the end of September 2006 from 22.70 per cent in March 2005. The bank wants to raise further the share of low-cost funds.

The bank also plans to reduce its net non-performing assets to 2.5 per cent by March 2007 from 4 per cent in June this year through recovery and growth in balance sheet, said Gautam Vir, managing director and chief executive.

DCB will look to expand its branch network to 110-120 branches from the current 67 branches and 5 extension counters by March 2009 said Vir.

"We will look to have a branch presence in Rajasthan and also at opportunities which will allow us to increase agricultural lending to meet priority sector targets," he said.

Currently, the bank falls short in fulfilling RBI norms of extending at least 40 per cent of its net bank credit to priority sectors, which include agriculture and home loans.

The bank's advances to priority sector are around 33 per cent.

"We are looking at a 6-7 per cent return on net worth this year and 12-13 per cent in the subsequent year," said Munjee.

The bank's net worth as on March 31, 2006 was Rs 139 crore. The bank's net profit in the first quarter of 2006-07 was Rs 4.3 crore.