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Private sector lender DCB Bank saw 61% rise in net profit for Q4 on higher net interest income. In an interview with M Saraswathy, Murali Natrajan, Managing Director and Chief Executive Officer, DCB Bank talks about the bank’s performance and the way forward. Edited excerpts:
The bank has posted a 61% rise in net profit. What was the actual profit excluding the deferred tax asset?
We posted a 61% rise in net profit. The net profit was Rs 63 crore compared to Rs 39 crore in same quarter the previous fiscal. The net interest income (difference between interest earned and interest expended) for the bank was at Rs 130 crore for Q4 compared to Rs 100 crore in the previous year.
However, the tax expense for FY15 was Rs 27 crore, which was partly offset by creation of net Deferred Tax Asset (DTA) of Rs 10 crore. But, excluding the impact of the DTA, net profit for Q4 was Rs 54 crore, which is an increase of 36% y-o-y.
There is a slight increase in the bank’s non-performing assets. What was the reason for it?
Our gross non-performing assets (NPA) stood at 1.76% as on March 31, 2015 compared to 1.69% a year ago. This was because there was a large corporate NPA of Rs 65 crore in the fourth quarter which impacted the books. This was a company in the ship building segment, which is a restructured account.
In FY15, gross NPA opened at Rs 138 crore, but we had fresh slippages of Rs 174 crore, whereas Rs 79 crore was upgrade and recovery. Further, Rs 47 crore was write-off. However, barring this one large NPA, credit quality is not much of a challenge.
Your CASA ratio also saw a decrease. Do you expect a turnaround in FY16?
Our CASA ratio as on March 31, 2015 was at 23.4% as against 25% as on March 31, 2014. This was because savings account grew by 17%. With new branches being added, savings accounts will grow by 25% when these branches mature.
Every year, we plan to open 25-30 branches across the country.
You planned to double the size of your balance sheet. Is your plan on track?
We aim to double the balance sheet in 36-42 months. As on March 31, 2015, the balance sheet was at Rs 16,132 crore as against Rs 12,923 crore as on March 31, 2014, a growth rate of 25%. We have been able to wipe off almost all accumulated losses, except Rs 4 crore. This will be wiped off in the first quarter of FY16.
We also want to increase its SME/MSME portfolio to 15-16%. Similarly, in the next two years, we aim to bring the cost-to-income ratio to 55%, which now stands at 62%.
With the Reserve Bank of India’s view that rates will be cut only when there is transmission by banks, do you see a reduction in the base rate?
With respect to the base rate, we are confident that the term deposit rates would come down in next 3-6 months. Accordingly, the base rate will come down.
