Private sector DCB Bank today said it is possible that its one or two large exposures may slip into non-performing asset (NPA) category this fiscal.
"In the last few years at any point in time, for various reasons, two or three corporate loans have shown signs of stress. So far, we have been managing these accounts and ensuring repayments.
"In the last quarter of FY 2015 we had one large exposure which became NPA. It is possible that one or two large exposures may slip into NPA in FY 2016 as well," DCB Bank said in a note related with general Q&A about the bank.
It said timely identification of stress, reducing exposure, exiting difficult accounts, redefining risk appetite are regular activities by the risk team to maintain portfolio quality.
"We also have a strong recovery process. We are hopeful of maintaining overall portfolio quality in FY 2016," it said.
Since it is not a member of Corporate Debt Restructuring (CDR), the bank said it is selective in restructuring loans. As of March 2015, the restructured standard portfolio of the bank stood at Rs 58.46 crore comprising 8 accounts.
Also, the bank said there is a lot of pressure on its Net Interest Margin (NIM), and it expects the pressure in the near term as well.
"However, if over time, term deposit rates starts to decrease, we may be able to recover some part of the NIM reduction."
The bank expects to improve its fee income...Our aim is to grow fee income by 12 to 14 per cent per annum. The focus is on granularity," it said.
Among others, the bank plans to open about 25-30 branches every year. At present, it has a total of 154 branches.
DCB Bank expects its branches to break even in 18-22 months depending upon size and location.
The main states for branch expansion are Andhra Pradesh, Tamil Nadu, Chhattisgarh, Delhi, Karnataka, Gujarat, Haryana, Madhya Pradesh, Maharashtra, Odisha, Punjab and Rajasthan.
It targets to reach over 300 branches in about 4 years.
Around 12 per cent of the branches as not performing as per plan, it added.
The bank also added that in 24-30 months it is targeting Return on Assets (ROA) of 1.3 per cent and Return on Equity (ROE) of 14-15 per cent.
"In FY 2016, full income tax rate may be applicable which will depress the profits after tax of FY2016 and affect ROE/ROA for FY2016, it said.
