Ladies and gentlemen, good day and welcome to the DCB Bank Q4 FY 2026 earnings conference call hosted by Adfactors PR. Joining on the call is the senior leadership team of DCB Bank, Mr. Praveen Kutty, Managing Director and CEO, Mr. Shridhar Seshadri, Whole Time Director, Mr. Ravi Kumar, Chief Financial Officer, Mr. Ajit Kumar Singh, Chief Investor Relations Officer. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Praveen Kutty, Managing Director and CEO from DCB Bank. Thank you, and over to you, sir.
Thank you, Yusuf. Good evening, ladies and gentlemen. Welcome to DCB Bank's Q4 earnings call. In line with what we said before, consistency, predictability, repeatability are very critical to us. This is the eighth successive quarter I've been presenting the results, and I'm happy to say that the bank continues to grow in line with the stated milestones and objectives that we have articulated in the last two years.
Bottom line first. The profit after tax for Q4 is at INR 206 crore and the full year is at INR 732 crore, both of which are the highest ever in the history of the bank. This is the third successive quarter of registering highest quarterly profit underlying the inherent consistency of our output. The bottom line is keeping pace with the top line and the operating jaws are widening.
16% income growth, 11% expense growth, full-year operating profit 25%, which is the highest in the last eight years. You'll be hearing this sentence quite a lot in the next 10 minutes of my opening speech. In Q4, advances have grown by 18% on a year-on-year basis and 6% in the sequential quarter.
Deposits have grown by 21% on a year-on-year basis and 7% in sequential quarter. We continue to ensure that the deposit growth outpaces the advances growth. The good part of the deposit growth is that the granularity of the portfolio continues to improve. Top 20 ratios well under 7%, 655 against 661 in the previous year.
Further, this growth is coming at lower costs. Cost to deposit in Q4 is 44 basis points lower this year as compared to Q4 of last year. The advances growth is coming from chosen products, the secured, small ticket and vanilla.
Mortgage, corporate, gold loan, agri, tractors, KCC, construction finance, educational institutional loans have contributed healthily to this particular growth. I want to take you through some of the commitments made in the beginning of the year. One of which was that we said that the co-lending book at the end of the year would be less than 15%. It is at 13.9%.
Actually, the co-lending book has decreased in absolute terms between Q3 and Q4. On net interest margin, the uptick continues. 3.39%, which we record in Q4 is 12 basis points higher than the sequential quarter and 10 basis points higher than the previous period in the same period last year. Remember, we also had a 25 basis point rate cuts full in cap impact happening in Q4.
Treasury had a very muted quarter as far as fees was concerned, as expected, but our third-party distribution and other fee avenues demonstrated a fairly healthy growth, resulting in our core fee income growth of INR 198 crores, which is the highest ever in the history of the bank. Gross NPA coming to the portfolio quality is at 2.45%.
Net NPA is at 0.89%, both of which are at seven-year lows. Our full-year credit cost is 40 basis points. I want to hark back to the Q1 guidance in which I said we had a 59 basis points credit cost in Q1 and had assured that there's no way we're going to be higher than 45 basis points credit cost for the year, and we have clocked in 40. Our upgrades and recoveries during this quarter was 109% of fresh slippage.
Our absolute gross NPA of INR 1,496 crores at the end of the year is lower than what it was in the beginning of the year. This is all about the output. What gives us confidence going forward is that the slippage ratio is 2.28%, down from 3.09%, and that can only augur well for the future as far as the portfolio quality is concerned.
We continue to improve our cost to average assets. Our cost to average assets is for the full year is 2.5%, despite taking what we took last in Q3, INR 27 crores because of the new wage code. For Q4, the cost to average assets is 2.47%. Our cost-to-income ratio has decreased by 300 basis points last year compared to this year. In November, during our investor day, many of you were kind enough to attend. We had reiterated quite a lot of things.
We reiterated our stance of changing our mortgage mix of home loan and business loan, improving our average ticket size, increasing direct sourcing vis-à-vis DSA. We see the benefits of this flowing in. Our employee productivity is historically the highest. Our OpEx cost increases are marginal. Remember, 16% growth in incomes, 11% growth in expenses, widening jaws.
We've been able to drop moderately on the yield and advances due to the rate cuts to a certain extent by the gains on yield on account of the mix change. Over the year, Q4 last year versus Q4 of this year, the yield in advances has decreased by 56 basis points despite we having 100 basis point rate cut applicable for this financial year. In Q4, our ROA is 0.97% and our ROE is 13.53%. The full year ROE is 12.77%, the highest in the last 11 years.
In fact, the highest ever since the bank became a full tax-paying entity. That's all the past. On a go-forward basis, the fundamentals of business that we have sowed and harvested for several years are continuing to bring in consistent, predictable, repeatable outcomes. We're confident that it should continue in the future as well.
There are clouds on the horizon on account of West Asia crisis. We have been cautious. We have overstocked on our liquidity. We have done detailed assessments, and we don't see an immediate impact on the portfolio performance. But again, it depends upon how long this imbroglio lasts. That's it. Now I leave the floor open for questions or clarifications. Operator, could you come in, please?
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Akshat Aggarwal from Swift Institutional Research. Please go ahead.
Good evening, sir. Thanks for the opportunity, and congrats on a good set of numbers.
Thank you.
My first question is on margins. NIMs have continued their robust upward trajectory and previously had guided for benefits from the deposit repricing to continue until Q2. If you can give some color on the repricing benefit which is still pending and how is the bank progressing on HL to BL incremental sourcing? Is it still 60/40?
Well, see, we expect the deposit repricing benefit to come till late Q2, perhaps early Q3. That's it. Not beyond that. Okay? That's the answer to your first question. HL to BL is much more than that. It's like we are almost 70/30, and that's really helping us.
It's helping us in terms of yield. It is helping us in terms of credit costs and the fact that we have also gone slightly higher ticket size has helped the cause consistently and that possibly is reflecting in the new slippages coming down from 3.09% to 2.28%. It's certainly a part contributed to that.
Right, sir. In terms of asset quality, which continues to be very strong, do you expect this trend to sustain, or should we anticipate normalization towards your through the cycle guidance of 45- 55 basis points? The business model guidance, barring this West Asia crisis.
See, as of now, we're sticking to the 40 and keep it below 45 basis points. Okay? See, currently we are at 32, 33 basis points. See, I don't see us in the short term getting increasing anywhere around the 45 basis points mark, and our model continues to be 45 to 50 basis points. So fairly strong on that, and I would expect a similar trend to continue. There's no reason to believe that in the short term we would have any reversal coming through.
Very well, sir. In terms of fee growth, which has been very strong for many quarters now, and with the latest quarter at 9% quarter-over-quarter, what are the key drivers for this quarter, and how should we see sustainability going forward? Is this still third-party distribution or is there some other drivers contributing? If you can help with some color, sir. Thank you.
It's a famous saying, "The leopard never changes its spots." We feel like that. Nothing happens all of a sudden. We continue to be well, high on third-party distribution. Forex income is decent. Trade is our area of concentration because repeatability of income is something which we are focusing on. Treasury gave us nothing in Q4. Nothing. We expect that trend possibly to continue. Core fee income is a key driver for fee going forward.
Right, sir. My last question is on branch expansion and headcount. What's your outlook going forward? I understand you added 11 branches in 4Q and employees around 400 on net basis. How should we think about investments on this front going forward?
If you see the number of employees, you see a U-shape coming through. If you were to see the number of employees that we have in, let me get the year right, 2024 end. You see that as of September of 2024, we had 11,900 people. We still are lower than that, but I expect us to hit a 13,000 kind of number by the end of this particular year.
We are still a people-driven business. A lot of our sales are assistant sales, so there will be more people coming in. Branches are optional. We don't necessarily need to have more branches to grow. People are required. Having said that, there is a very high probability that we'll cross a 500 branch barrier or rather mark during this year.
Very well, sir. Thank you very much for answering all my questions. All the best.
Thank you. Next question is from the line of Parth M. Gupta from 361 Capital. Please proceed.
Yeah. Hi, sir. Thanks a lot for the opportunity. My first question is on the day, if I-
Sorry to interrupt, Mr. Parth. Your voice is breaking.
I'm so sorry. I don't know if you can hear me, but we just can't hear you.
Mr. Parth?
Yeah.
Can you hear me now?
Yes, we can hear you now. Please proceed.
Yeah. Okay. My question was on margin. If I look at your yield on advances is flat quarter-on-quarter. Cost of funds have declined slightly. The liquidity on the balance sheet has gone up quarter-on-quarter. So ideally, margins should have not improved by 12 basis points or should have improved marginally, is what the calculation suggests. Are there any one-offs in the margins?
No, there are no one-offs in the margin. We are not a one-off business. You can't be in a retail environment and have one-offs. What you could have is queues at the month-end. The liquidity buildup could be towards the end rather than the other way around. One of the key factors in NIM is the quality of portfolio. If you recover 109% of your fresh slippage, it is bound to have an impact not only on the GNPA but also on your NIM.
Okay, fair enough. Perfect. My second question was on the cost to assets, considering for the full year we are at around 2.45. What is the-
For the full year, we are at 2.5. For the quarter, we are 2.4.
Okay. What is the further juice left here? Or what will lead to the further improvement of cost to assets from here on? Or it will be stable at around these levels?
See, this is a bit like the earlier question which was asked on credit cost. Models suggest 45 basis points to 55 basis points of credit cost. Models suggest 2.5% of cost to average assets. Reality, we are slightly better than that.
I would be very happy at 2.5. Remember, there is going to be an increase in the number of people, which will also result in more productivity. It has already been one. There will be a linear increase through the year of number of people.
Okay.
Those investments are critical, and despite that, we are reasonably confident of our 2.5% cost to average going through.
Okay. Perfect. Just one last question, if I can squeeze in. Because the war was persisting large part of the March month, have you tweaked any of your risk filters while sanctioning and disbursements to keep MSME customers?
I think we were lucky more than We never predicted this. But going up the ladder of ticket size, it is meant to be an operation productivity exercise that has resulted in lower bounces. We sacrificed a bit of a yield, but we are getting better quality customers, and that is reflecting on fresh slippages being better.
All these things happened much before the war actually manifested. Now, if this continues, it will affect everybody, but people at the lower end of the economic pyramid will get impacted more. This is not a specific problem we have. If hydrocarbon prices go up, everyone is going to get affected. The effect will be largely felt by people who do not have the security or a cushion to take care of this extra expense in their monthly bills.
I would tend to think that reprofiling and going up the ticket size about a year and a half back is helping us compared to where we would have been had we not moved the needle. But this is not a reaction to the war at all. It just so happened that it helps us that we had done these things much beforehand.
Sure, sir. Thanks a lot, sir.
You are welcome.
Thank you. Next question is from the line of M B Mahesh from Kotak Securities. Please go ahead.
Hi. Just two questions from my side. When you speak to your collection teams and when they are reporting such strong numbers, would you ascribe this on the ground that their leverage levels for the borrowers have come down, their access to credit has improved?
What is the general feedback as to what constitutes a better recovery? Number one. Second one is that if assuming that we are into this slowdown and there is a slowdown in the next six to nine months, would you say that the book today is better than where it was in 2023 when we had the slowdown led by unsecured loans and MFI, or would you say that the book is broadly the same?
Let me answer your first question first. What has really happened is, if you were there in the investor day presentation, I made the statement saying that we moved from managing NPA to managing one DPD, as in one days past due. When we made the statement, we have already implemented that. We did put in more people.
We significantly improved our early bucket collection. The intensity has increased significantly. What you see in March is the result of those activities which we did somewhere around June, July, and then persisted with it. That is the way I see it. So it is more of intensity, it is more of focus in the earlier buckets, which we were not really focused upon. Otherwise, your slippage ratio would never have come down. Then you could have any kind of recovery, 109% recovery.
It will help the NPA most certainly, but that will not help the slippage. One particular metric you can look at is for the first time we have given slippages of gold loans separately, okay, in the investor presentation. That clearly is an indicator of the pressure in the market because we do not do early bucket collection in gold loan.
It is not worth our while because the gold is there. Why call on the 30th day? That is an operational cost. There is a natural delinquency which we see on the gold loan, and I would tend to imagine that as a reasonably good barometer for the pain at the lower end of the pyramid. If you were to look at that page number, I think it is 36. The bottom left-hand corner. You can see there is marginal improvement.
I'll just read out the number for those people who haven't seen this. It used to be 6.29 a year back. Now it is 5.3. This is natural repayment or natural slippage which really happens. The real action happens near NPA rather than at the beginning.
Perfect. Thank you. To the question that you're saying with respect to the portfolio that you're carrying today versus where you were probably about 2 years back.
See, 2 years back, our credit cost was in the region of somewhere between 0.38 and 0.42. Currently, we are at 0.4. What we've done is we have ridden the wave. If history were to repeat, we will also repeat the particular performance. You see marginal increase in our credit cost still will be below 400 basis points. That's a very strange statement to make because if freight prices were to shoot up, you could see a situation whereby inflation really is impacted.
Second order issues of petrochemical-oriented products not coming into the market could keep the supply chain inefficient. It is not just about inflation alone. Everybody's impacted. Unlike COVID, you can't do quantitative easing and get out of this. It's not going to be that easy. But at the moment, it's good to be in a position where your slippage ratios are lower, where your NNPA are lower, your recoveries are higher. It's a good place to be in.
Just to clarify, in your assessment when you are looking at those borrowers, are you seeing a situation where those borrowers' leverage levels is similar to where they were two years back, or they are better or worse off as your assessment of the customers that are coming to the fold.
The reason I am not able to give you a straight answer is the customer stock, which we had two years back, is very different from the customer stock that we are having today. Because over the last two years, the kind of ticket size of customers that we have onboarded, the kind of profile of customers that we have onboarded are different.
Our MFI book has dramatically come down. At one point of time it was INR 1,400 crore book. Now it is around INR 600, INR 700? Yeah, INR 600, INR 700 crore book. It is not the same. While the balance sheet has grown by 25,000, the customer advances have grown by about 18%. The fact remains that they are not that comparable.
Perfect. Thank you, sir.
You are welcome.
Thank you. Next question is from the line of Rohan M . From Equirus Securities. Please proceed.
Good evening, sir. Thanks for the opportunity.
Hi, Rohan.
Congrats on good set of numbers.
Thank you very much.
This is on the yield. Yields are flattish Q1 Q. What we had explained earlier in the conference is our book on the mortgage, especially, has switched to floating. We see gradual repricing over some period. With repo cuts happening, what has helped us sustain yields at this level, especially with corporate disbursements also picking up? Have we taken any increase in spreads on incremental lending or what has helped that? If you can explain that.
Yeah. Frankly, if you see our co-lending book has come down. Co-lending book is a low-yield book. It comes at low cost but low yield. This is a product mix game. If you see, we have grown 6% quarter-on-quarter sequentially, and our co-lending book has de-grown.
So the low-yielding book has de-grown and the higher-yielding book has grown, which has resulted in incremental yield being higher. It has absorbed the 25 basis points repo rate cut, the full impact of which we had in Q4.
Sure, sir. Sir, secondly, if I look at slippages, ex-gold it has fallen to 1.5%.
1.5%.
Yes, 1.5%. Just trying to get a sense, given how the macro is evolving right now and there is uncertainty on how things will shape up. Given your interaction with the clients, is this sustainable going into FY 2027, especially with negative net slippages, can this trend continue in FY 2027?
Very difficult to answer because there are so many unpredictable, imponderables there. What you see day 1 is very different from what you see on day 2, right? There is so much of change happening which makes prediction really very difficult. What I am confident of is that I do not see our net NPAs going back above 1%. If we said that, I do not know if you remember in the Q3 call, I said we will be below 1%.
We are there and we intend to stay there. Like I said in the opening remark, the benefit is coming through lower slippage, higher focus on the early buckets. If an SME customer does not get the component that he wants to complete his product, he will suffer, and along with him, we also will suffer. We are aware of that. So far, we are not seeing that happening. That is not a guarantee for the future.
Sure. Sir, lastly, what will drive your NIMs towards your business model NIM target of 350-365 basis points? What is your timeframe expectations around that?
If there is one thing I am not happy in a very decent quarter or a decent year for the matter, there are so many things which are good. One thing which I am not very happy about is the current account pickup. We are focused on it. Our CASA growth is 10%. Our core growth is flat, and that is not a good thing to happen. We are putting resources behind it. We are putting effort behind it.
We are putting focus behind it. That has to improve. Practically everything that we put focus on, you see an improvement happening. It is time it happens in the current account portfolio as well. That is one big driver. We have really moved the needle on engagement with our savings customers. There is a whole host of cross-sell activities happening on our asset customer base. Is it still a snowball? It has not reached avalanche.
But sustained efforts over a period of time. Retail was that way. The good work that we had done about a year and a half back, you are seeing the result of it now. We are at it. We just keep progressing on the right path, trust the process, and the results will happen.
Sure, sir. Sir, thanks for the opportunity.
You are welcome.
Thank you. Next question is from the line of Jai Mundhra from ICICI Securities. Please go ahead.
Yeah. Hi, good evening, Praveen. Thanks for the opportunity.
Hi, Jai.
Yeah. I have two questions. One is, if I look at your slippages number. Just a broad calculation, overall slippages are 2.28%, excluding gold is 1.47%, and gold is 5% roughly.
5%.
The number somehow does not tally in the sense that gold is supposedly less than. If I do the reverse calculation, it looks like gold is 20% of the portfolio to drive that change from 2.28%- 1.47%. These are gross slippages number only, right? That is why I am assuming these are gross slippages, 1.47% and 5% of gold.
That is right. These are actual numbers. I can put you out to my finance folks or collection folks and can have a discussion on that, can take you through the numbers. 2.28% is our slippage. It is coming down from 3.09%.
Right. Okay. Let this. Anyway, so I will check that out. Second is, sir, on the growth front. So we have done 18% growth, which is much faster than the industry. But somehow, as you also mentioned in the opening remarks, the core lending has declined Q2, and rightly you had highlighted at the beginning of the year also that at some point of time it will moderate.
But the growth of the core businesses like mortgage, 10%, 11%, MSME flat or negative. As you said, core lending, I believe this core lending is a function of CLM transition. So how should we look at the next year going ahead when mortgage is 10%, 11% and the MSME is still yet to pick up? And so far the growth has been coming from here.
Let's look at that. That's a good question. I'm sure my answer will help a lot of people in this call. Can we look at Q quarter? Look at the quarter and look at the mortgage growth in this quarter. You want me to tell you the page number?
Yeah. 3.8%.
Yeah. For sake of argument, let's say 4%. If you were to multiply by four, you're talking about 16. What you've seen is while the bank has grown 18% in this year, 24% in the last year, we have been busy re-engineering the mortgage business. We have really turned it around because that has contributed to delinquencies.
It is a lower ticket issue, which was vulnerable. We have really, really turned, changed the wheels of the train while the train is still moving. You haven't felt it because other products contributed to that particular growth. Now what's happening is a better BL-HL SKU, a better self-source versus DSA-sourced mortgage is up and running, and every quarter that growth is better than the previous QOQ growth.
What you've seen, the 10% of growth that you saw in the year, I would look at it slightly differently and say 6.5% was a growth in the first nine months and 3.5% is a growth in one single quarter. The 3.5% of the mortgage book that we are growing in the quarter is of a supremely better quality than the kind of book that we had a year back. Are you with me? Hello?
Yes. This part is understood. Yes.
Clearly, there is a takeoff happening on that count. My finance folks have just come in with some broad math. Can I go to the earlier question?
Sure, sir.
All right. Sorry. Vishal, you want to explain this?
Gold have a weightage of 21% and a slippage of 5.3%. Other than gold have a weightage of 79% and a slippage of 1.4%.
Right.
Overall, it is coming to 2.38% at DCB Bank.
Correct.
No, sir. You are right. If the gold weightage is 20%, then it is the math that is usually right.
Yeah, 21.21%. That covers the discussion. Okay. That is the second question. Can I ask you a question, Jai?
Yeah. Please, sir.
Do you remember in the investor day, we were standing outside. Then you told me, at that time, our NNPA was 1.22%. You told me, for a business of our type, you remove the 22 basis points from the ROA. Do you remember the conversation?
Yes, I do, sir.
Okay. I want to tell you don't have to do that anymore. We are at eight, nine bits.
Yeah.
And-
Correct me. Congratulations, sir. Yes.
Once again, I want you to know that, and thank you for it, because this kind of conversation, I want to let you know, helps us also. Now we are at 8, 9 bits. I just want to tell you that there are not promises. The intentions that we say, we take it extremely seriously and we demonstrate it by the performance. You see that coming through in the next few quarters as well.
Right, sir. Well appreciated, sir. Yes.
Thank you. Okay.
No, sir. Sorry, just to come back. Gold loan proportion is 20%, 21%, but in this table, the advances mix the gold loan proportion looks like 7%, 8%. I believe the core lending plus gold plus it is also sitting somewhere.
Absolutely.
Core lending.
See, core lending, we have about INR 8,366 crores of core lending. Bulk of which is gold. And then you have normal gold, our own gold of over INR 4,000 odd crores.
Right. Okay. Sure. And sir, then going ahead, mortgage, I take your point, sir, that mortgage has accelerated and maybe it will sustain. But if the other piece, so far this quarter, the growth has also been contributed by corporates and MSI institution, which may or may not be desirable or you can still sustain. I am saying that in case of co-lending not being a meaningful contributor to the growth, which portion will do the heavy lifting apart from mortgage?
I want to repeat what I said earlier. Consistently we have been saying throughout. I will tell you this, our co-lending growth in 2024, 2025, it is not in this book, but if you have to look at the previous book, it was 108%. 1-0-8%. This year it is 24.9%. That is 2025, 2026.
In the current year, 2026, 2027, I am not telling you the percentage, but it will be exactly the same as the overall asset growth of the banks. Are you with me? 108 has been brought down to 24.9% and in the current year, 2027, 2028, sorry, 2026, 2027, co-lending growth will be exactly similar to the overall asset growth of the bank. That is one part of it. It will not be zero and it is not even advisable. It will be the steady normal growth happening there.
You will have growth coming in from the mortgages. There are some impact players like SME, MSME, and construction finance, where a lot of effort has gone into it. The output is yet to come, but it will not remain like that forever.
We will see contribution coming in from these core segments. The agri segment, I do not know how fertilizer prices will be affected by this West Asia crisis, but assume that life is normal, I would tend to think that tractors, KCC growth will happen.
I am not a big fan of MFIs. We do MFIs only to meet the small farmer, marginal farmer requirement. It is not meant for balance sheet growth, or you have to do it. The history has not proved very good either for us or the industry. But yeah.
The BC MFI growth will be sufficient to meet our small farmer, marginal farmer appetite. That is the way we see this. Do the math. 6% is a quarter-on-quarter growth. You remove co-lending, it comes to 8.6% non-co-lending growth. I am not saying 8.6 into four. I wish I could say that. My senior leadership team also sitting here. Just imagine 8.6 into four, then I could be leaving home at 4:00 every day.
Right. And sir, any guidance or you would. I think in the analyst day you had said that this 18%-20% kind of a growth we should be delivering over the next. That still remains a broad guidance, right?
In these times when there are clouds, et cetera, on the horizon, we are cautious. We only know the pains of getting a 1.22% NNPA to 0.89%. Our team is fully aware of the pain of getting a 3.32% gross NPA eight quarters back to 2.45%.
These are hard, not to talk about slippage. These are hard-earned lessons. We are very confident about growth, what kind of growth that we want. And we think we are fairly on a good track as far as the portfolio is concerned.
Right. Last question, sir, on co-lending CLM change. Correct me, my understanding is that it has now changed from discretionary to non-discretionary, and which is why you may have some disruption in the March quarter. Has that been sorted already or you believe there could be some more teething issues when you align towards the new guidelines?
One good thing about the bank is the quality of tech. That is one really good thing that we have. But that doesn't guarantee everything because partners' tech also should be up to gear. We acted pretty much early, around September, October on this, and we got it absolutely right. Some of the big gold loan players are our partners and it's working very well with them.
Probably since we are all in the financial industry, you'll be covering them also. I invite you to even speak to them and figure out how this particular thing is progressing. We are very comfortable with them. They are very comfortable with us. And I'm sure some of these guys are part of your coverage.
Right. No, sir. Just coming to your question is that disruption, the transition is over and even incrementally, you said that co-lending will be growing as much as the overall growth. I would believe that the entire transition is over and there is no more-
Why I am not giving a straight answer on that is it is over for gold. It is not over for We do educational student financing. We do school financing. We do LAP. We keep doing various things. So in areas of little volume consequences, we are a bit slow.
So at a bank level, is it done fully? No. But as far as our gold loan is concerned, which is our lion's share of our core lending, we are very comfortable. The reason why gold loan is a lion's share of core lending is because you can accurately predict the loss.
Correct. Does this change anything, sir, structurally and in the transition? One is, I believe you may not have discretion in terms of how you partner with the partner. Is there anything also changes or not?
We had this partnership, Jai, with one of our partners from 2022. That partner was our single largest partner-
Correct
until February of 2024.
Right.
Then we had a second big partner coming through. We are talking about four-year history. We are talking about two-year history. It's like a full-fledged I can do a PhD on gold lending, at least.
Right.
These are the kind of relationships and partnerships that we have for the core lending part. I don't see any disruption coming in. Sorry.
Okay. Lastly, sir, if I may ask, why is there a seasonality in the fourth quarter? Is this a normal seasonality in terms of lower slippages, higher recovery, or there is something more fundamental in the product that we have? All banks have seasonality, which is favorable seasonality in Q4, but for our case, looks slightly more pronounced. Any reason or it's like business as usual type? Thank you.
Our appraisal is in April. I can't think of any reason, Jai. Sorry.
Okay. No issue, sir. Thank you and all the very best. Yes.
Thank you.
Thank you also.
Thank you. Next question is from the line of Aditya from Securities Investment Management. Please proceed.
Yeah. Hi, sir. Thanks for the opportunity and
Hi Aditya.
Congratulations on the good set of results.
Thank you very much.
Sir, my first question was on NIMs. How should we see the NIM trajectory now from here on? Do you see them still improving? Because while your deposits are still getting reprice, your CASA share has been reducing. Rates industry-wide have been hardening. Also your reliance on bulk deposits has been increasing. It is now 20% of your deposits. How do you see the NIMs for the bank going forward?
I want to focus on CASA deposit because the ultimate truth which is a mixture of the CASA, institutional deposits, excess liquidity that we keep for a rainy day. All that is reflected in CASA deposit. Right? Have a look at the trend line of the CASA deposit. Our belief is that if we were to renew as much as we renew normally, we should be having some advantage going all the way into Q2. After that advantage will stop.
That is only part of the story. In the Investor Day, I had mentioned this. This is public information. Just do this. Look at the peak retail term deposit rate of three of the biggest private sector banks and three of the biggest public sector banks, and come with a composite peak retail term deposit rate. Compare that with DCB Bank's and see how convergence is happening.
This number, the difference between the composite weight of the six largest banks in India and us at one point of time was about 1.27. It was 0.89, if I remember right, in March. It is there in my Investor Day presentation. It is 0.89. We brought it down to something like 0.60 or 61.
0.61.
0.61. It is publicly available. Why we are not doing bulk deposit is I am not aware because many banks don't publish that. We do, right? That way, it is slightly unequal. This is an indication. One is of longer tenor deposit maturity, and you are having a benefit of renewal repricing. The second is even fresh deposit.
This bank used to be a bank which was in the top three of highest interest rates. Please look at the website of similar-sized banks. We are no longer there. The bank has learned to sell liability products on items other than price also.
Price is still a big component. We are not anywhere where we need to be. But the reason why people bank with you, earlier used to be the rate. Today it is changing. It has been hard work for the last one and a half years.
Our branch banking team has done a fantastic job of switching it. The proof of the pudding is look at the website. Look at the website and find out. I don't want to name banks now. We've grown 20.91%. Look at our rates. Similar size, even bigger size banks.
If you're not lower than them, the distance between the two has dropped. That's how we are seeing it. Like I told another gentleman earlier, we're really working hard on getting our story on current account right. Effort has gone into it. Results have not come in yet. We're not people who give up easily.
Understood. Sir, I understand that we have been more aggressive in cutting rates as compared to other banks. When I look at the deposit growth, that is majorly coming from bulk deposits. Our retail deposits have not been keeping up pace with the overall deposit growth. How do you see that going forward?
For us, there are two things which really matter in the order of priority. We should be liquid. Being liquid is not a choice, so pure play liquidity is important. Cost of deposit is important. Long tenure is important. If you meet these conditions, frankly, if it is a star coming in, really doesn't matter.
There was a time when the banks used to give 8% rate on savings account. Today, I think it gives 6.7%. That's the rate that the bank gives. That's why I said, it's easy to grow bulk SA and show a better CASA ratio. We prefer to grow deposits and keep the cost of deposit down.
Whereas CASA is an equal story. You can compare CASA across banks. SA comparing doesn't really make sense because some of the SA is actually more expensive. Like one day you can put money into savings account and get, in our bank, it's at 6.7%. So it is really expensive, but it helps in terms of saying publicly CASA ratio is good.
I would take the thing you should look CASA and SA separately. While we don't publish it, our weighted average pricing on a SA has come down significantly. If 25 basis point rate cut happened and we have reduced our cost of deposits in Q4, which is a traditionally very liability-hungry market, it comes because we are getting the right kind of deposit.
Okay, sir. Just last bit on this deposit part.
Yeah
DCB is generally known for being focused on granularity either being on advances or on deposits.
Yes.
Bulk deposits is currently 20%.
Yeah
Is there any percentage beyond which you won't be comfortable going bulk deposits?
Like I told you, we have to ensure that if you get a bulk deposit, which is of a lower rate of interest, earlier we were giving it up. But now we are managing three things. We are managing granularity, we are managing ROI, and we are also managing the-
Tenor
sorry, the-
Tenor
the tenor. So it is an uneven battle. We have triangulated these three things. Earlier, we used to take a stance stating that even if the rates are lower, we will not take bulk because it doesn't meet our small ticket criteria.
But in a time like now when there is chaos, liquidity is important for us. So it is good to have extra liquidity even if it means there is a higher carrying cost. So we do have bulk deposit. Do we have a number on retail term deposit? Yes, of course. We have to grow that. We want to grow that. But this is a good buffer to keep for keeping your cost of deposits down.
Sure, sir. Understood. And sir, on your ROE. So for the ROE to improve from here, I believe NIMs would be the major lever for us to grow because your credit costs and OpEx costs are pretty much under control. And for the NIMs to improve from here would cost on deposits be the only trigger for us to improve our NIMs?
Yes. We don't want to go into a higher yield segment because this is not really the time to go to a higher yield segment. It comes whistling in the tail. Improvements will come because we're keeping a tighter rein on the cost of deposits.
Understood. Got it. On this SME book, this INR 2,000 crore book. How big is the TReDS part? Because we were looking to de-grow that part of the book. How is the book apart from TReDS growing for us, the CCPL part?
It's not growing. That's why I said we are putting some effort into it. It's not growing. It is stuck where it is. If I see it's a flat kind of thing quarter-on-quarter. It has decreased by about 13% year-on-year. We are kind of redressing that. We got a new vertical to look at the greater than 3 crore.
There are a lot of good customers who are above a particular threshold, 3 crores, were leaving the bank because it's meant to be a small ticket program. We said, "Look, that doesn't make any sense." You're just filling up the bank.
We have got a new, from July onwards, we've been having the channel. It is just getting set and ready. That's where the momentum we see happening. The SME comeback will happen. TReDS is about INR 300 crore book. It used to be 300, it continues to be 300, so there's no change.
Understood. And sir, just last question. What is the bank's now position on fundraising? We have got an enabling provision for fundraising.
Yeah.
How is the bank looking?
We should be in the next 2 quarters maybe. Maybe either late Q2 or early Q3 we should be going in for our fundraise. Because we see that as a bank, we will be continuing to grow at this kind of pace. If we do continue to grow at this kind of pace with a similar kind of portfolio mix, probably we will reach our internal red flag by Q1 of 2027, 2028. We do not want to wait that long. Maybe Q2 and Q3 business.
Understood, sir. Sir, thank you, sir, for answering my question.
Not at all.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address the question from all the participants in the conference, please restrict yourself to two questions per participant. Should you have follow-up questions, please rejoin the queue. Next question is from the line of Param Subramanian from Investec. Please proceed.
Yeah. Hi, thanks for taking my question. Congratulations.
You are not
on the quarter.
Yeah.
Yeah. Firstly, on the board, the enabling resolution for the capital raise.
Yeah
Is that an enabling, is it just procedural or are we looking at something? And INR 1,500 crores seems the largest number.
Yeah, maybe. I'd be happy with something like some maybe I don't know, INR 1,100, INR 1,200 crores.
Okay.
It is good to keep some INR 1,500 crore enabling resolution done. But $100 million, not slightly more, maybe somewhere in that particular region. The thought process behind it is simple. Take what you need right now at the price prevailing at this particular point in time.
Our belief is that if we continue performing like this, the next raise will be at a different level. Do not over dilute at this point in time, just do what is required to continue this particular growth momentum. Then when the next level of expansion happens, hopefully soon, we will be raising again at a slightly different level with the fundamental numbers looking even better than what it is looking today. That is what is driving the management thought process.
Perfect. Makes a lot of sense. Secondly, on your provision coverage ratio, this quarter it has gone up sharply. What level are we broadly comfortable with?
Yeah, 78% plus is good. As a company, we like to keep those provisions, but anything above 75% is okay. But if you remember, we had some MFI loans had gone bad in the last year, Q1, Q2, et cetera. So we want to ensure that the aging provision of that should not stutter us. So we have kind of sufficiently ensured provisioning in these unsecured small ticket microfinance kind of loans off Q1, so that there is some evenness in the way things will happen going forward.
Got it. Lastly, this is just on the quarter. Your NIM is up 12 basis points, right?
Yeah.
Now, is there some day count or something impacting that? Because your NII is broadly in line with your loan growth and your asset growth, right? So 12 basis point uptick, I am just trying to reconcile with the quarter-on-quarter 5% NII growth.
See, what I look at is instead of worrying about day count, I just compare ours with Q4 of last year. Last year Q4, we were 3.29. Neither was last year a leap year, nor is this year a leap year. I think so.
So you are talking about similar kind of thing. So if you are having 10 bps improvement on NIM despite having 100 basis point repo rate cut impact, not doing too badly.
No, I was looking at the quarter-on-quarter sort of movement.
Yeah. Quarter on quarter.
30 basis points, right?
Yeah.
basis points but.
Yeah. I would generally always look at January, February, March with the January, February, March and April, May, June so that in case there are any abnormalities of number of days coming into play. Comparison with similar kind of time frame the previous year is a good indicator are we making progress or not.
Perfect. That's all I had. Congratulations on the quarter once again.
Thank you very much.
Thank you. Next question is from the line of Akshay Badlani from HDFC Securities. Please proceed.
Yeah, hi. Thank you for taking my question.
Hi, Akshay. How are you?
Hi, I'm good. Thank you. Praveen, just wanted to ask you mentioned you're increasing employees headcount to 13,000 from current
Around 13,000 from current, yes.
Yeah. So 1,500 addition for the next year. Just wanted to understand in which areas are you looking to add on and how would we ensure that our cost to income, the trend that has been there and we have maintained reducing our cost to income, how would we ensure that in spite of adding employees that we will maintain that trend rate?
Okay. Yeah.
Because we haven't added employees in the last year or so. Yeah. Apart from-
We kept on adding, and we kept on getting rid. It is not as if we never added. So our exit process was very sharp and good. But where I see this coming in is, it's not for this year. We see practically all these folks going into the liability and deposit acquisition. So we'll put more people in the branches, we'll put more people on the distribution front.
I realize this, the basic math tells us that between our self-sourcing sales network on mortgages and their DSA-dependent sourcing, initially you may feel that 2% or 2.5% to the DSA is cheaper. But we've seen that the loan sticks with you for 2 years, 2.5 years, whereas self-sourcing loans stick with you for 6, 7, higher than 6 years. You're getting the benefit coming through. The BTs, the balance takeouts are considerably less.
You own the customer, not somebody else. And the credit quality of these loans are really better than what the DSA sourced loans are. They are a necessary. I'm trying to find another word for evil. They are a necessity. We can't live without them, but our dependence has to necessarily come down.
So I don't mind putting in the people there because I'm very confident that the team has shown it to me that from a longevity perspective, from a balance BP out perspective, from a coupon perspective and a credit perspective, these customers over the currency of loan in our bank are far, far better quality than DSA. Whereas the basic math of 2.5% per ticket size with a 5 lakh salary of a sales executive may initially look like it's a bad call, it is not. I mean, if you know how to run the non-DSA channel.
Sure. My second question was on the line of cross-sell. At the analyst day, we had indicated of the DCB Niyo cards where we would like to cross-sell.
Right.
In terms of liabilities like OD facility, we were wanting to offer. So what kind of progress have we made there?
I am very happy to say that a sizable chunk of the 3.8% QOQ mortgage growth has come from the branch banking channel. Look, this is bread and butter for most companies. For us, it is not. For us, this is a low-hanging fruit that just kind of is kicking in. This has not been news at all. Honestly, this should have been the way things should happen.
Anyway, let's not complain. Clearly that is coming through from the branch banking channel, less so from the digital channel. That's one. Our credit bureau linked interventions on our liability base is where these LAP loans and home loans are coming through. We are reasonably happy with that. I am not particularly happy with the level of cross-sell that we have achieved so far. But again, that is not stopping us from trying. There is a pressure within.
It is difficult. It's not an easy thing. But we are at it. It is giving us result. I knew it would be a painfully slow process, but it is certainly a painfully slow process. But yeah, directionally, is it going okay? Yes. From a volume sense, it is a bit frustrating at times. But there's no choice. I'll keep at it, and we'll see the benefit of it coming through.
Sure. Thanks for that. Thanks for answering my questions.
Not at all.
Thank you. Next question is from the line of Puneet Balani from Talat Capital. Please proceed.
Hello sir. Am I audible?
Oh, you are very much audible. Yes.
Yeah. Firstly, on the margin front, like this quarter, firstly, if you could explain where the 12 basis points quarter-on-quarter is coming from. Secondly, if you are looking at from a next year perspective,
Right
is it safe to assume that given that we have a lot of bulk deposits and we are doing a mortgage book pretty well, despite that we will get some decline from funding costs, like we can expect margins to be range-bound around these levels because of these two factors? Any comment on that?
It can happen. I mean, can it be range-bound in this particular level? Possible. Like I told the gentleman earlier also, compare us quarter on quarter with the same quarter the previous year. If it happens, it primarily will be an execution issue because our ability to get the liabilities at a cost that we want is a journey that we are taking and we are very happy with the first 9 months of that progress. People have learned that you do not need to be one of the highest rate provider to get liabilities into the bank. So that I would see as an execution risk rather than a strategic risk. So it is worked very well so far.
In Q4, if we can get that kind of volume and still keep the rates, not about the cost, the rates, the offered rates on the website lower than who we used to have a margin, a difference with other banks who had a margin with, it is a good thing going. There is an institutional resilience building on ability to get lower cost in deposits. No way are we near the big six or big seven, but we are not the bank that we were a year and a half back.
Right. Thanks. On the growth front, I know you have mentioned in your presentation that in three to four years you aim to double the balance sheet. Given the fact that now the way you have highlighted that with the co-lending book, it is already at a decent base. Is it fair to assume that growth will be around these levels for the next couple of years or so, or you are targeting still the 20% level plus?
I think 18%-20% is a given. You just look at our March 2022 liability numbers and multiply by two.
Right.
You just multiply our March 2022 asset numbers and see where we are.
Right.
INR 59,800 was our asset number in March 2022. Today you are at INR 60,000.
Right.
Your liability number was INR 35,000 or slightly INR 36,000? Yeah, INR 35,000 in March 2022. Today you are at INR 72,000. That's four years and that four year where one year our bank was recovering from COVID. So getting up to speed. So in that tough times, we can do that. We had a microfinance kind of problem hitting us, secured LAP problem hitting us.
Despite all this, we are managing both the credit quality and the growth. These things will happen and that's why we are paid in the first place, right? To manage these imponderables. You know something is going to hit you. You don't know what it is, and how well you manage that is the resilience of an institution.
Right. Okay. That's it from my side, sir. Thank you.
Okay. Thank you very much.
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to Praveen Kutty for the closing comments. Over to you, sir.
Thank you very much for your attention and watch this space 90 days from now.
Thank you, sir. On behalf of DCB Bank, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.