crisil research ier report dcb

Development Credit Bank Ltd

Enhancing investment decisions

Initiating coverage

CRISIL Limited. All Rights Reserved.

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process

Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental

grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The

valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to

grade 1 (strong downside from the CMP).

CRISIL Fundamental Grade

Assessment CRISIL Valuation Grade

Assessment

5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)

4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)

3/5 Good fundamentals 3/5 Align (+-10% from CMP)

2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)

1/5 Poor fundamentals 1/5 Strong downside (

CRISIL Limited. All Rights Reserved. CRISIL EQUITIES | 1

June 22, 2011 Fair Value Rs 61 CMP Rs 56

Fundamental Grade 4/5 (Strong fundamentals)

Valuation Grade 5/5 (CMP has strong upside)

Industry Information technology

Polaris Software Limited Business momentum remains intact

Fundamental Grade 2/5 (Moderate fundamentals)

Valuation Grade 3/5 (CMP is aligned)

Industry Banking

Development Credit Bank Ltd Coming out of the woods but challenges remain Development Credit Bank (DCB), one of the smaller private sector banks, offers corporate banking, SME/micro SME lending, agri/rural/microfinance banking and retail banking. It has 80 branches concentrated mostly in Gujarat, Maharashtra and Andhra Pradesh. We assign DCB a fundamental grade of 2/5, indicating that its fundamentals are moderate relative to other listed securities in India.

Came out of the woods DCB, which had focused on high-yield unsecured lending in FY08 to ramp up the loan book funded by wholesale deposits resulting in delinquencies during the economic downturn, has come out of the woods. The bank restructured its balance sheet and renewed its focus on securing the loan book with a diversified mix - small and medium enterprises (SME), micro SME, corporate and secured retail lending). The banks management team was also replaced by a new team led by Mr Murali Natrajan.

but challenges lie ahead in maintaining asset quality DCB still faces a couple of challenges a) balancing its loan book growth with containment of costs and b) ramping up the loan book faster without substantial incremental slippages. However, the managements current strategy of focusing on underwriting standards has been able to arrest further deterioration in asset quality. The efficacy of the revamped model has helped DCB to report lower provisions in FY11 and we will monitor this in the coming quarters. Given the small size of the bank, it is prone to attrition risks. Being small bank, it faces challenges in funding large scale projects.

Loan book growth to start reflecting in top line CRISIL Equities expects DCBs total income to increase at a two-year CAGR of 20% to Rs 4.3 bn in FY13, driven by growth in net interest income (comprising 60-65% of the total income) with the current level of NIMs. With this, the EPS will improve to Rs 3.6 in FY13 from Rs 1.1 in FY11 and adjusted book value per share is expected to increase to Rs 35 in FY13 from Rs 26 in FY11.

Operating parameters and return ratios up but below industry average Although the key operating parameters viz. cost to income, net NPAs and return ratios have improved in FY11, they are still below industry average as the bank has just transitioned from losses. However, we believe that the operating parameters and return ratios should normalise post FY13.

Valuations the current market price is aligned with the fair value We have used the justified price-to-book ratio (P/B) method to value. Accordingly, we have arrived at a fair value of Rs 61 per share. We initiate coverage on DCB with a valuation grade of 3/5.

KEY FORECAST

(Rs mn) FY09 FY10 FY11 FY12E FY13E

Total Income 3,173 2,491 3,012 3,526 4,275 Profit after tax (881) (785) 214 420 820 Net interest margins 2.9 2.8 3.1 2.9 3.1 Capital adequacy ratios 13.4 14.9 13.3 15.4 14.7 Net NPAs to net advances (%) 3.9 3.1 1.0 0.9 0.8 EPS (Rs) -5.1 -3.9 1.1 1.9 3.6 Adjusted book value (Rs) 23.6 21.7 26.0 31.5 34.7 Dividend payout ratio - - - - - P/E (x) -11.0 -14.2 52.1 29.9 15.3 P/ABV (x) 2.4 2.6 2.1 1.8 1.6 RoE (%) -15.1 -14.5 3.9 6.4 10.3

NM: Not meaningful; CMP: Current Market Price

Source: Company, CRISIL Equities estimate

CFV MATRIX

KEY STOCK STATISTICS NIFTY/ SENSEX 5276/17560

NSE /BSE ticker DCB

Face value (Rs per share) 10

Shares outstanding (mn) 200

Market cap (Rs mn)/(US$ mn) 11,800/249

52-week range (Rs) (H/L) 78/39

Beta 1.62

Free float (%) 77%

Avg daily volumes (30-days) 2,291,215

Avg daily value (30-days) (Rs mn) 136

SHAREHOLDING PATTERN

PERFORMANCE VIS--VIS MARKET

Returns

1-m 3-m 6-m 12-m

DCB 4% 36% 21% 37% NIFTY 5% 6% 1% 17%

ANALYTICAL CONTACT Chetan Majithia (Head) [email protected]

Vishal Rampuria [email protected]

Elizabeth John [email protected]

Client servicing desk

+91 22 3342 3561 [email protected]

1 2 3 4 5

1

2

3

4

5

Valuation Grade

Fu

nd

am

en

tal G

rad

e

Poor Fundamentals

ExcellentFundamentals

Str

on

gD

ow

nsi

de

Str

on

gU

psi

de

23.1% 23.1% 23.1% 23.1% 23.1%

2.7% 4.9% 3.6% 8.3% 8.3%8.1% 3.4% 6.2% 3.5% 1.9%

66.1% 68.6% 67.1% 65.2% 66.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mar-10 Jun-10 Sep-10 Dec-10 Mar-11

Promoter FII DII Others



Table 1: DCB - Banking Operations

Parameters Corporate SME & MSME# AMRB* Retail

Loan book

contribution (FY11) 25.9% 23.9% 19.9% 30.3%

Loan book

contribution (FY13) 24.7% 28.5% 17.9% 29.0%

Service offering Term loans and working

capital loans to mid-

corporate whose annual

turnover is Rs 5,000-

7,000 mn

Term loans and working

capital loans to SMEs

and micro SMEs whose

annual turnover is

Rs 100 mn to Rs 1,000

mn and up to Rs 100

mn, respectively

Priority sector lending as

well as microfinance

lending

Focusing primarily on

mortgages home

loans, LAP, gold loans,

etc. Reducing personal

unsecured loan book,

commercial vehicle and

construction equipment

book

Market position DCB is one of the smallest private sector banks with a market share of 0.1% in advances as well as

deposits among the scheduled commercial banks and a market share of 0.5-0.6% in advances and

deposits among private sector banks in FY10

Industry growth

expectations CRISIL Research estimates banking credit will grow by 18-20% in FY12 and FY13

Loan book growth

(FY09-FY11 2-yr

CAGR)

9% 51% 22% -1%

Loan book Forecast

(FY11-FY13 2-yr

CAGR)

20% 31% 14% 18%

Demand drivers Banking credit growth driven by economic growth, sustained thrust on infrastructure and global trade

Competitors Private sector banks, public sector banks, co-

operative banks and foreign banks

NBFCs and banks

# MSME = micro SME

*AMRB = Agri, micro finance and rural banking

Source: Company, CRISIL Equities



Grading Rationale

Revised strategy - restructuring balance sheet

DCBs strategy in 2007 was to grow its loan book primarily through high-

yielding personal loans. Since retail term deposit and CASA deposit growth was

lower than the loan growth, the bank resorted to wholesale deposits/treasury

operations. Exposure to unsecured personal loans increased sharply to ~32% of

the loan book during FY08. Although this strategy helped DCB to grow its loan

book by 53% in FY08 (double the banking industry credit growth of 26%), the

economic downturn resulted in huge delinquencies in the loan portfolio,

predominantly personal loans. Gross NPAs to gross advances and net NPAs to

net advances peaked to 11.24% and 4.96% in Q2FY10 and Q1FY10,

respectively. The reliance on high-cost wholesale deposit also put pressure on

the banks net interest margins (NIMs).

Key changes undertaken by the bank

Rejig at the management level There were many changes at the management level. Mr Murali Natrajan, with nearly three decades of

banking experience across India and other Asian countries, joined as the

CEO and MD effective April 2009. Prior to joining DCB, he served as the

global head of SME banking in Standard Chartered Bank (Singapore). Under

the new leadership, the bank initiated the cleaning process of the loan book

and revamped its strategy.

On the asset side, driver for loan book growth shifted from risky loans, viz. unsecured personal loans, commercial vehicle loans and construction

equipment loans, to a balanced diversified portfolio of secured book, viz.

SME, micro SME, corporate and secured retail lending. The risky personal

loan disbursement was discontinued in August 2008 and has been in runoff

mode since then.

On the liability side, the bank renewed its driver for deposit book growth towards retail term and low-cost CASA deposits instead of wholesale

funding.

Operational realignment of various business verticals was undertaken. Further, underwriting standards were revamped with more focus on secured

loans and other stringent criteria for loan approvals.

Conscious efforts to cut costs resulted in lowering of operational expenses from Rs 2.3 bn in FY08 to Rs 2.0 bn in FY11. Focus was shifted to rein in

efficiency, which lowered the headcount from 2,235 in FY08 to ~2,100 in

FY11.

... puts bottom line back into profit

With the new strategy in place, the bank has been able to improve its key

operating parameters resulting in bottom line back in the black in Q2FY11 after

seven quarters of loss.

Managements efforts

directed at cleaning up

the balance sheet



Figure 1 A: DCB turns profitable at bottom line after seven

consecutive in the red quarters

Source: Company

but small balance sheet restricts its ability to fund large projects

In spite of the bank restoring its balance sheet and attempting to improve its

financial position, we believe its small balance sheet size compared to its peers

restricts its ability to fund large projects.

Figure 1 B: Cannot fund large projects

Balance sheet size FY10

Source: Company

Moving from risky high-yield unsecured lending

The key problem area for the bank was its inability to manage unsecured

personal loans and commercial vehicle (CV) and construction equipment (CE)

loans which were part of the retail vertical. Though the yield on such loans was

attractive, the portfolio suffered huge delinquencies during the economic

downturn in FY09. Inadequate underwriting standards resulted in higher

slippages in the unsecured retail portfolio. As a prudent measure, DCB

completely curtailed disbursing such loans in August 2008 to prevent further

stress in the loan portfolio, which had comprised a large chunk, i.e.~77%, of

10

-32

-913

-353

-169 -181

-82-29

48 82113

-1,000

-800

-600

-400

-200

0

200

Q2-F

Y09

Q3-F

Y09

Q4-F

Y09

Q1-F

Y10

Q2-F

Y10

Q3-F

Y10

Q4-F

Y10

Q1-F

Y11

Q2-F

Y11

Q3-F

Y11

Q4-F

Y11

(Rs mn)

62

81

105

116

220

255

271

339

354

364

374

425

438

1,807

2,226

3,639

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

DC B

Dhanlakshmi Bank

Lak Vilas Bank

City union bank

Karur Vysya bank

South Indian Bank

Karnataka bank

ING Vysya Bank

IndusInd Bank

Yes bank

Kotak Mahindra bank

J&K Bank

Federal Bank

Axis bank

HDFC Bank

ICICI Bank

(Rs b

n)

Running down problem

area: Personal unsecured

loans as well as commercial

equipment, construction

equipment loan book

reduced sharply to Rs 0.3

bn and Rs 1.76 bn

respectively in Q2FY11



the retail portfolio and peaked to ~32% of the total loan book in FY08. The

delinquencies resulted in gross NPA increasing from 1.5% in FY08 to 8.7% in

FY10. With management curtailing disbursement, such loans have been in

runoff mode; the share of unsecured personal loans, CV, CE and STLV loans

(commercial vehicle, corporate equipment and small ticket vehicle loan) reduced

sharply to 7.3% of the retail portfolio and 2% of the total loan book in FY11. We

expect it will be almost wiped out from the books by FY13.

Figure 2: Sharp run down of personal loan book Figure 3: Running down CE, CV and STLV loans

Source: Company, CRISIL Equities Source: Company, CRISIL Equities

to secured balanced diversified lending

Under the revamped asset strategy, the bank is now cautiously focusing on

secured loans, viz. mortgages, SME, micro SME, mid-corporate and AMRB (agri,

micro finance and rural banking), thereby diversifying its loan book and making

it more balanced. It is also moving towards a floating rate regime which offers

the flexibility to re-price loans.

With this perspective, DCB started focussing on mortgage loans (home loans

and loans against property) or secured retail lending. To achieve faster growth

in mortgages, it is even exploring inorganic routes. During Q2FY11, the bank

acquired a significant portion of mortgage assets from a leading non banking

financial company (NBFC). The management indicated that the portfolio was

acquired after stringent risk assessment of individual loans from the available

loan pool.

Table 2: Significant mortgage book acquired

FY09 FY10 Q2FY11

Sourced mortgages 80.9% 71.4% 50.3%

Acquired mortgages 19.1% 28.6% 49.7%


CRISIL Research expects housing loans to register double-digit growth in FY12

on the back of higher housing demand in an improved economy. We expect

DCBs mortgage book to grow by ~18% from FY11 to FY13. Mortgage loan book

is expected to dominate the retail vertical with a dominant share by FY13.

7.0

3.3

1.0 0.6

0.3 0.1 0.1 0.0

17.2%

10.1%

2.8%1.7%

0.8% 0.2% 0.1% 0.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

FY08

FY09

FY10

Q1-

FY11

Q2-

FY11

FY11

FY1

2E

FY1

2E

(Rs bn)

Personal Loan Personal Loan % of total Loan Book (RHS)

6.1 5.6 2.8 0.7 1.3 0.9

15.1%

17.0%

8.0%

2.0% 2.5%1.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

FY08 FY09 FY10 FY11 FY12E FY13E

(Rsbn)

CE, CV and STLV Loans CE and CV as % of total loans (RHS)

New growth engine:

Secured retail loans, viz.

mortgages increased

sharply to Rs 9.2 bn

through sourcing as well as

acquired mortgages in

Q2FY11



Figure 4: Mortgage share to be 24-25% of the loan

book

Figure 5: Retail loan mix moves towards secured

lending

* Mortgages include home loans and LAP


Based on factors like the huge potential in Indias SME sector, new

managements strong domain experience in handling SMEs and the location of

the majority of its branches in areas where a lot of self-employed persons/

entrepreneurs are based, DCB intends to aggressively target the SME and

micro-SME segments with an annual turnover of Rs 100 mn to Rs 1,000 mn

and up to Rs 100 mn, respectively. However, this segment faces huge

competition from other large banks and NBFCs. The bank plans to attract such

customers through services like cash management services which are available

only to large corporates catered to by other banks. However, considering

various risks associated with lending to SMEs, it has beefed up its underwriting

standards and risk management system using the expertise of the current

management team. The lending to SMEs typically has collateral ranging from

~60% to 90% of loan. We expect overall SME loan book to grow at a CAGR of

31% from FY11 to FY13.

On the corporate side, DCB earlier suffered on few big corporate accounts

which went delinquent due to the economic slowdown. Small size restricts large

corporate funding for the bank. Moreover, loans to large corporates results in

concentration of the loan book which increases the credit risk. Therefore, the

bank is now targeting the mid-corporate segment with an annual turnover of

Rs 5-7 bn - disbursing largely working capital loans through a cautious lending

strategy. We expect corporate loans to grow at a CAGR of 17% from FY11 to

FY13E.

The AMRB segment is another growth driver for the loan book, through which

DCB primarily aims to meet its priority sector lending (PSL) targets. Alongside,

under the microfinance segment, it has started offering gold loans.

With these initiatives, we expect composition of the overall loan book to alter

towards increasing proportion of SME (29%), corporate (25%) and AMRB (18%)

loans in FY13E.

0.02.6

4.1

10.812.8

15.1

0.0%

8.0%

11.9%

25.3% 25.2% 24.4%

0%

5%

10%

15%

20%

25%

30%

0

2

4

6

8

10

12

14

16


(Rs bn)

Mortgages % of total loan book (RHS)

0%

20%

46%

84% 84% 84%

41%

25%

11%

1% 0% 0%

59% 55%43%

16% 16% 16%

0%

20%

40%

60%

80%

100%


Mortgages Personal Loan Other Loans

Moving towards secured,

balanced and diversified

loan book



Table 3: Growing SME, AMRB and corporate book

along with curtailing growth in retail book

Figure 6: Moving towards secured, balanced and

diversified loan book composition

Rs bn FY08 FY09 FY10 FY11 FY12E FY13E

Corporate loans 18.5 9.3 11.1 11.1 12.7 15.3

% growth y-o-y -49% 19% 0% 15% 20%

SME & micro SME loans 1.7 4.5 6.0 10.2 13.3 17.6

% growth y-o-y 168.0% 33.9% 70.2% 30.0% 32.5%

Retail loans 17.0 13.2 8.9 12.9 15.2 17.9

% growth y-o-y -22.4% -32.6% 45.2% 17.6% 17.5%

AMRB loans 3.4 5.7 8.6 8.5 9.4 11.0

% growth y-o-y 68.4% 50.3% -0.9% 11.0% 17.0%

Total Loans 40.6 32.7 34.6 42.7 50.7 61.8

% growth y-o-y -19.3% 5.7% 23.5% 18.6% 22.0%


Loan book expected to grow in line with industry

The loan book which grew marginally by 5.7% in FY10 (least growth vis--vis all

other listed private sector banks) rose by ~23.5% y-o-y in FY11 helped by the

acquisition of mortgage assets, outpacing the industry bank credit growth of

21.5%. With the new focus area in place, DCBs overall loan book is expected to

continue to grow a CAGR of 20% from FY11 to FY13.

Figure 7: DCBs credit growth expected to exceed

industry credit growth

Figure 8: Improving credit off-take every quarter

post Q2FY10

Source: CRISIL Research, CRISIL Equities Source: Company

Signals of asset quality improving on change in mix

The asset quality of DCB had worsened with percentage gross NPAs to gross

advances and percentage net NPAs to net advances peaking to 11.24% and

4.96% in Q2FY10 and Q1FY10, respectively. For FY10, gross NPAs and net NPAs

as a percentage of loan book remained at 8.7% and 3.1%, respectively, the

highest amongst peers in the banking industry in FY10. However, the impact of

the restructuring of the balance sheet was visible in FY11 with gross NPAs and

net NPAs at 5.9% and 1.0%, respectively. Provision coverage ratio was a

healthy 88% in FY11 (including technical write-offs), much higher than the RBI

46%

28% 32% 26% 25% 25%

4%

14%17%

24% 26% 28%

42%

40% 26% 30%30% 29%

8%17%

25% 20%19% 18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Corporate loans SME & Micro SME Loans Retail loans AMRB loans

53.1%

-19.5%

5.7%

23.5%

18.6%22.0%

26.0%

21.0%17.0%

21.0%

23.0% 23.0%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%


DCB Loan growth Industry Bank Loan Growth

33 31 30 3135 35

38 4043

-20%

-5% -5%

6%

10%

1%

10%

3%8%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

0

5

10

15

20

25

30

35

40

45

Q4-

FY09

Q1-

FY10

Q2-

FY10

Q3-

FY10

Q4-

FY10

Q1-

FY11

Q2-

FY11

Q3-

FY11

Q4-

FY11

(Rs bn)

Advances book q-o-q (%) (RHS)

Worsened asset quality

starts correcting with focus

on secured lending



guidelines. We do not expect further losses due to PL, CV and CE as

provisioning is already in the book and also because 70% to 90% of the overall

loan book is secured now. The loan provisioning ratio has significantly improved

from 4.1% in FY09 to 1.2% in FY11 and we expect it to be ~1% by FY13.

Assuming a slippage ratio of ~1.1% and 0.9% in FY12 and FY13, we expect a

fall in gross NPA and net NPA by 209 bps and 14 bps over FY11-FY13. However,

it is a challenge for the bank to grow the loan book without any incremental

slippages especially when it has ramped up its loan book in the SME segment.

Also, if the bank again decides to ramp up the loan book aggressively by

compromising on asset quality, it may once more get into trouble.

Figure 9: DCBs NPA ratio expected to taper

southwards

Figure 10: Loan loss provisions expected to decline

as provisions for unsecured personal loan provided


But NPA ratio still one of the highest

In comparison to the listed peers in the private banking space, DCBs net NPA

ratio to net advances was one of the highest in FY11.

Table 4: One of the highest NPA ratios in FY11 in industry

Listed banks % Gross NPA %Net NPAs

DC B 5.9 1.0

ICICI Bank 4.5 0.9

HDFC Bank 1.1 0.2

AXIS Bank 1.0 0.3

Bank of Baroda 1.4 0.4

Corporation Bank 0.9 0.5

Dhanlaxmi Bank 0.7 0.3

IndusInd Bank 1.0 0.3

ING Vysya Bank 2.3 0.4

Source: BSE, CRISIL Equities

Trying to shift from wholesale to retail deposits

During FY05-09, DCB funded the loan book by high-cost wholesale deposits as

growth in the loan portfolio was higher than in retail deposits and CASA

accretion. This resulted in cost of overall deposits escalating to 7.5% in FY09.

The bank has currently shifted focus on retail term deposits and low-cost CASA

deposit to fund the loan book.

1.5%

8.4% 8.7%

5.9%

4.7%

3.8%

0.7%

3.9%

3.1%

1.0% 0.9% 0.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%


Gross NPA ratio Net NPA ratio

1.5%

4.1%

3.4%

1.2%

1.1%0.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%




With no branch additions in the past two years, growing CASA remains a

challenge for DCB. However, by sweating branch assets, it has been able to

grow CASA by 17.5% and 16.7% y-o-y in FY10 and FY11, respectively.

Assuming six-seven branch additions over the next two years, CRISIL Equities

expects absolute CASA to grow in FY12 and FY13, supported by growth in the

CA portion on the back of services offered to SMEs and mid-corporates. We

expect proportion of CASA deposits to moderate from the current level due to

higher growth in retail term deposits. However, the share of overall retail

deposits is expected to remain at the current 78-79%.

Figure 11: Absolute CASA growth ~17% in FY11-13 Figure 12: Proportion of CASA ratio to remain flat


Table 5: DCBs CASA % in line with banking peers in FY11

CASA %

HDFC Bank 51.0

ICICI Bank 45.1

AXIS Bank 41.0

ING Vysya Bank 34.6

DC B 35.2

Bank of Baroda 28.7

IndusInd Bank 27.2

Corporation Bank 26.0

Dhanlaxmi Bank 22.9

Source: CMIE, CRISIL Equities

to help NIMs stay around 3% level

Growth in low-cost CASA deposits and retail term deposits, which has offset

run-off in high-yielding personal unsecured loan book, will help maintain NIMs

at 3% level during FY11 to FY13. The attempt to shift from high-cost wholesale

funding to low-cost deposits has reduced the overall cost of deposits.

Additionally, the loan book has moved from fixed to floating interest rates with

low duration giving re-pricing flexibility which will maintain NIMs. However,

given interest rate scenario, NIM is expected to moderate to 2.9% in FY12 and

again improve to 3.1 % by FY13.

15

14

17 20

24 27

17.8%

-2.3%

17.5% 16.7%

19.0%

15.3%

-5%

0%

5%

10%

15%

20%

25%

0

5

10

15

20

25

30


(Rsbn)

Absolute CASA y-o-y growth (RHS)

24.3%

31.0%35.4% 35.2% 35.5% 34.7%

53.0%

67.9%

82.6% 80.4% 79.6% 79.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


CASA/ Total Deposits Retail Deposits / Term Deposits



Figure 13: NIMs to hover at ~3% Figure 14: NIM comparison (FY11)

Source: Company, CRISIL Equities Source: Industry, CRISIL Equities

Focus on SME segment to grow non-interest income

With the bank targeting a more diversified and balanced loan book, we believe

SME, micro SME and mid-corporate segments will help generate core fee income

for the bank. The bank targets to provide cash management services, letters of

credit, bank guarantees, etc. to SMEs and micro SMEs post the due diligence

process, which is a key driver for core fee income. To conserve capital, DCBs

treasury desk is following a conservative approach with ~85-90% of the

investment in held to maturity (HTM) category. The exposure limits are

squeezed given its small balance sheet size. For FY12 and FY13, we expect

marginal trading gains, factoring in that once a year it is allowed to transfer

investments from HTM to AFS and book trading profits, if any.

Figure 15: Non-interest income expected to grow at

a CAGR of 13% from FY11 to FY13

Figure 16: Core fee income to grow at a CAGR of

13% from FY11 to FY13


Proposed fund-raising to help in loan book growth

In FY10, DCB issued lower tier II subordinated bonds and raised Rs 650 mn as

well as raised QIP of Rs 800 mn at Rs 32 per share, on account of which the

capital adequacy ratio improved from 13.4% in FY09 to 14.9% in FY10. With

this, the promoters (AGA Kan Fund) stake fell to 23%. The capital adequacy

ratio stands at 13.3% in FY11. We expect that a further announcement of QIP

13.6%

12.3%

11.1% 10.9% 11.3%

7.5%6.4%

5.8% 6.1% 5.8%

2.9% 2.8% 3.1% 2.9% 3.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

FY09 FY10 FY11 FY12E FY13E

Yield on Advances Cost of Funds NIM

4.4%

3.7%

3.7%

3.5%

3.3%

3.1%

2.6%

2.6%

2.5%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

HDFC Bank

Bank of Baroda

AXIS Bank

IndusInd Bank

ING Vysya Bank

DCB

ICICI Bank

Dhanlaxmi Bank

Corporation Bank

1.7

1.2

1.1 1.1 1.2 1.4

88%

-31%

-11%

5%11%

15%

-40%

-20%

0%

20%

40%

60%

80%

100%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0


(Rsbn)

Non-Interest Income y-o-y growth (RHS)

1,383

957

830 778

859

991

182

20

178253 288

332

172224

6390 94 108

0

250

500

750

1,000

1,250

1,500


(Rs mn)

Core Fee Income and Other Operating Income Trading Gains Forex Income

Non-interest income

expected to grow, but

would contribute ~35% of

the loan book



of Rs 1.5 bn - assuming Rs 60 per share (three months average market price) -

will result in capital adequacy ratio (CAR) of 15.3% in FY12. This will result in

further equity dilution of promoters stake by 3-4%, moving in line with RBIs

guideline of bringing down the promoters stake to 10% by FY14E. Additionally,

the run-down in unsecured personal loans which carry high-risk weight of 125%

will help lower the overall risk weighted assets of the bank, thereby shoring up

the capital adequacy ratio going forward.

Figure 17: Capital adequacy ratios

Figure 18: Movement of promoters stake

(AGA Khan Fund#)

#Assumed fund raising at Rs 60 per share


Cost efficiency ratios below industry par to drag overall profitability

DCBs cost to income ratio was 80% in FY10 (highest among all listed private

banks) on account of a fall in total income due to balance sheet restructuring.

Deteriorating cost to income ratio coupled with improvement in opex/average

assets (3.7% in FY08 to 3.4% in FY10 despite balance sheet reduction) indicate

that assets did not translate into income generation for the bank in FY10. DCB

revamped various processes and headcount which helped it to reduce operating

cost from Rs 2.2bn in FY08 to Rs 2.0 bn in FY11. We expect operating cost to

increase at a CAGR of 8-10% during FY11-13. We have factored in six-seven

new branches during that period. With an improvement in top line, we expect

cost-to-income ratio to improve to ~62% in FY13. However, the same would

continue to remain high, thereby impacting DCBs overall return ratios.

11.8% 11.6% 12.0% 11.1% 13.4% 13.0% 12.9%

1.6% 1.8%

2.9%

2.2%

2.0%1.7% 2.0%

13.4% 13.4%

14.9%

13.3%

15.4%

14.7%

15.0%

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

15.5%

16.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

FY08 FY09 FY10 FY11 FY12E FY13E FY13E

Tier I Capital Tier II Capital Total CAR (RHS)

27%26%

23%23%

20%

21%

22%

23%

24%

25%

26%

27%

FY08 FY09 FY10 FY11

Improving cost

efficiencies but still

below industry par



Figure 19: Improvement in cost to income ratio due

to increase in total income

Figure 20: DCBs cost to income ratio highest

among private banking peers (FY10)

Source: Company, CRISIL Equities Source: CMIE, CRISIL Equities

68.5%

76.3% 80.6%

71.4%

67.9%

61.7%

3.7%3.6%

3.4%3.2%

3.0%2.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

60%

65%

70%

75%

80%

85%

90%


Cost to income Opex/ Avg. assets (RHS)

35%

37%

39%

42%

43%

47%

48%

51%

57%

60%

71%

81%

83%

0% 20% 40% 60% 80% 100%

Federal Bank

Yes bank

City union bank

Axis bank

Karur Vysya bank

South Indian Bank

HDFC Bank

IndusInd Bank

ING Vysya Bank

Karnataka bank

Kotak Mahindra bank

DC B

Dhanlakshmi Bank



Key Monitorables

Failure to ramp-up the loan book without any incremental slippages

DCB has been largely successful in moving out of the problem assets. For the

bank to enter the next league, we believe growing the loan book faster without

any incremental slippages would be a challenge. Hence, management is trying

to improve asset quality, especially under writing standards. So far, the bank

has adopted a conservative lending approach. However, if it again decides to

ramp the loan book aggressively by compromising on asset quality, it may get

into trouble.

Inability to acquire new branch licences

As per management, in the past two years, the RBI did not give any new branch

licence to DCB as the bank was incurring losses and its promoters shareholding

has been above RBI guidelines. With DCB turning profitable and the banks

roadmap to reduce promoters stake, we believe RBI should give a green signal

for new branch licenses. In July, 2010 DCB received permission from RBI to

open two new rural/semi-urban branches in Gujarat, which are slated to be

operational by end of FY12. Any inability to acquire new licenses will put

pressure on growth in the long run.

Potential target given its size and branches

Given DCBs small balance sheet size and branch network, CRISIL Equities

believes that it can be a potential target.

Employee retention

Being one of the smaller banks in the private sector, employee retention is

expected to be a huge challenge.

Growing the loan book

without significant NPAs

could be a challenge



Financial Outlook

Total income to grow at two-year CAGR of 20% in FY13

We expect DCBs total income to grow to Rs 4.3 bn in FY13 with higher

contribution from net interest income (comprising ~60-65% of total income).

We expect 23% CAGR for DCBs net interest income in FY13 driven by strong

business (deposits + advances) growth of ~20% with slight moderation in NIMs

at ~2.9% to 3%. Loan book growth will be driven by a balanced mix between

various segments viz. corporate, SME, retail and AMRB whereas deposit book

growth will be driven by retail deposits (comprising almost ~78% of total

deposit book).

We expect a marginal 13% CAGR in non-interest income driven by core fee

income, trading gains and miscellaneous income.

Figure 21: Total income expected to grow at two-

year CAGR of 20%

Figure 22: Net interest income expected to drive

total income


PAT to grow manifold; adjusted book value to increase from Rs 26 in FY11 to Rs 35 in FY13

DCBs PAT has moved from a loss of Rs 784 mn in FY10 to a profit of Rs 214 mn

in FY11 and is expected to continue its positive run with a profit of Rs 820 mn in

FY13, primarily driven by strong income growth, improvement in cost to income

and reduction in provisions due to a significant write-down in unsecured

personal loans, commercial equipment and commercial vehicle loans. We have

also factored in equity infusion of Rs 1,500 mn at Rs 60 per share (current

market price) for FY12. With an expected improvement in profitability, we

expect adjusted book value (adjusting for net NPA) per share to rise from Rs 26

in FY11 to Rs 35 in FY13.

3173

24913012

3526

4275-8.7%

-21.5%

20.9%

17.1%

21.2%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500


(Rs mn)

Total Income y-o-y growth (RHS)

62.2% 57.0%62.8% 64.8% 66.5%

37.8% 43.0% 37.2%35.2% 33.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Net Interest Income/ Total Income Non Interest Income/ Total Income

Total income of the bank

to grow at a CAGR of

20% led by net interest

income (comprising 60-

65% to the total income)

Strong growth in total

income drive bottom line



Figure 23: PAT to grow on lower base Figure 24: Book value per share


ROE and ROA to expand in FY13 but remain below industry average

DCBs ROE has improved from -14.5% in FY10 to 3.9% in FY11 and we expect it

to further improve to 10.3% in FY13E with capital infusion factored in FY12 but

it still remains below industry average. Its ROA has significantly improved from

-1.3% to 0.3%, due to balance sheet restructuring and we expect it to increase

to 0.9% by FY13. We believe its ROA in FY13 will be somewhat in line with the

industry average of 1%. We expect return ratios to normalise post FY13.

(881)

(785)

214 420

820

-330%

-11%

127%96%

96%

-500%

-400%

-300%

-200%

-100%

0%

100%

200%

-1,000

-800

-600

-400

-200

0

200

400

600

800

1,000


(Rs mn)

PAT y-o-y growth (RHS)

23.6

21.7

26.031.5

34.7

-31.3%

-7.9%

19.8% 21.1%

10.2%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

0

5

10

15

20

25

30

35

40


(Rs )

Adjusted Book Value y-o-y growth (RHS)



Management Overview

CRISIL's fundamental grading methodology includes a broad assessment of

management quality, apart from other key factors such as industry and

business prospects, and financial performance.

Restructuring of the management team

DCB revamped its key management team starting FY09. Mr. Murali Natrajan

joined as the Managing Director and CEO of DCB effective from April 2009.

Earlier, he served as the Global Head for SME banking in Standard Chartered

Bank and as Director of cards business in Citibank India. Mr. Bharat Sampat,

with over two decades of experience in diverse industries viz. manufacturing

and banking, joined as the CFO effective September 2008.

Second line of management

Based on our interactions with DCB, we believe the banks second line is

reasonably experienced. Key managerial personnel have more than 20 years of

experience in their respective fields and most of them had prior associations

with reputed banks like Standard Chartered Bank, Citibank, etc.

Challenges still ahead

DCBs current management team has been instrumental in reducing losses and

getting the bank into profitability. However, growing the business to bring back

the bank into reasonable profitability ratios could be a challenge.

DCBs current

managements focus

includes moving away

from legacy issues of

unsecured lending which

has started reflecting in

FY11 performance



Corporate Governance

CRISILs fundamental grading methodology includes a broad assessment of

corporate governance and management quality, apart from other key factors

such as industry and business prospects, and financial performance. In this

context, CRISIL Equities analyses the shareholding structure, board

composition, typical board processes, disclosure standards and related-party

transactions. Any qualifications by regulators or auditors also serve as useful

inputs while assessing a companys corporate governance.

Required corporate governance standards are reflected in the board constitution

and by the presence of audit and other committees, which support board

processes. Based on the balance sheet disclosures, attendance record of

independent directors and their level of engagement in company affairs, it

appears that the corporate governance is reasonably good and conforms to the

required standards.

Board composition

DCBs board consists of 10 members, seven of whom are independent directors

(70%), which is well above the minimum stipulated requirements under Clause

49 of SEBIs listing guidelines. DCBs promoter (Aga Khan Fund) has designated

Mr. Nasser Munjee as DCBs chairman. He also heads a couple of other Aga

Khan institutions in India and has served as chairman/ director in various banks

and financial companies viz. ICICI, HDFC and IDFC. He sits on 15 corporate

boards in India including Tata Motors, Voltas, ABB India, Cummins India,

Ambuja Cements, etc. Since Aga Khan Fund has a substantial 23% stake in

DCB, it has inducted four nominee independent directors.

Given the background of the directors, we believe the board is fairly

experienced and bring rich expertise to the board.

Boards processes

The boards processes appear to be well structured, with nine committees

including audit, nomination, and risk management in place, supporting good

corporate governance and decision making framework. Chariman Mr. Munjee

heads the nomination committee, executive committee and capital raising

committee while the others are chaired by an independent director each.

Reasonable standards of disclosures and transparency

DCBs quality of disclosure and transparency can be considered good, based on

the level of information and details furnished in the annual report, websites and

other publicly available data. The company also holds analyst conference calls to

discuss the quarterly results performance.

Adequate corporate

governance practices

followed at DCB



Valuation Grade: 3/5

We have valued DCB using the justified price-to-book ratio (P/B) method using

FY14 as we expect the profitability of the bank to improve significantly from the

current level and get normalised in FY14. Accordingly, we arrive at a fair price of

Rs 70 for FY14. On discounting the fair value by 15.5% in FY14, we arrive at a

fair value of Rs 61 per share in FY13 and thereby our implied P/B works out to

1.6x on FY13E adjusted book value. We believe that the implied P/B of 1.6x is

higher and ROE of 10.3% in FY13E is lower than the comparable private sector

banks, however this is because we expect the profitability of DCB to normalise

after FY13. Accordingly, we initiate coverage with a valuation grade of 3/5,

indicating the current market price is aligned with the fair value.

Table 6: Peer Valuation table

M-Cap

(Rs bn)

Book Value (Rs) P/ BV (x) ROE (%) ROA (%)

FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13

Development Credit Bank 12 28 34 37 2.0 1.7 1.6 3.9 6.4 10.3 0.3 0.5 0.9

City union bank 18 25 31 38 1.8 1.4 1.2 22.6 22.4 21.0 1.6 1.6 1.6

Dhanlaxmi bank 10 93 117 133 1.3 1.1 0.9 4.5 7.4 9.2 0.3 0.5 0.5

IndusInd Bank 118 76 89 112 3.1 2.7 2.3 18.6 17.9 19.5 1.4 1.5 1.6

ING Vysya Bank 39 206 238 278 1.7 1.5 1.2 13.1 14.9 16.9 0.9 1.0 1.0

South Indian Bank 27 15 17 20 1.6 1.3 1.2 18.0 18.7 18.6 1.0 1.0 0.9

Median 1.7 1.4 1.2 18.0 17.9 18.6 1.0 1.0 1.0

Prices as on May 02, 2011

Source: CRISIL Equities for DCB, Industry

Fair value estimate of

Rs 61 based on justified

P/B method



Company Overview

Development Credit Bank is a small private sector bank promoted by Aga Khan

Fund for Economic Development (AKFED) offering corporate banking,

SME/micro SME lending, ARMB and retail banking. As on FY11, the bank had a

network of 80 branches with loan book of Rs 43 bn and net worth of Rs 6 bn.

During FY03-05, DCB lent mostly to big corporates along with small ticket loans.

The bank suffered heavy losses as these turned delinquent. The bank was re-

capitalised in FY05 through private equity investments and also got a new

management on board. In 2006, the bank came up with an Initial Public

Offering (IPO) and raised Rs 1.86 bn. In FY07, DCB started focusing on retail

loans, especially high-yield unsecured personal loans and commercial loans to

grow its asset book. The share of unsecured personal loan as a percentage of

loan book peaked at 32% in FY08. However, the unsecured loans turned

delinquent during the economic downturn, resulting in huge losses. The

management team operating then was replaced by a team lead by Mr Murali

Natrajan. The bank began to revamp its strategy with complete closure of

personal loans and commercial loans. The bank now focuses on secured,

balanced and diversified loans funded by low-cost CASA and retail deposits.

After two consecutive years of losses, the bank did a turn around with a profit of

Rs 214 mn in FY11.

Figure 25: Series of losses in DCBs past, now back to profit


300 341 345

174

-1,629

-853

74

383

-881-785

214

-2,000

-1,500

-1,000

-500

0

500

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

(Rs mn)



History and major developments

Year Key events

1930 Incorporation of Masalawala Co-operative Bank Limited and Ismailia

Co-operative Bank Limited

1981 Amalgamation of Masalawala Co-operative Bank Limited and Ismailia

Co-operative Bank Limited into Development Co-operative Bank Limited

1995 Conversion from a co-operative bank to scheduled commercial bank,

promoted by Aga Khan Fund for Economic Development

2004 Classified as a new private sector bank by RBI

2006 * PE Investment of Rs 520 mn @ Rs 45 per share in February

2006 IPO of Rs 1.86 bn @ Rs 26 per share in September

2007 # Preferential allotment of Rs 2,800 mn @ Rs 105 per share in August

2009 Issued lower tier II subordinated bonds aggregating Rs 650 mn

2009 QIP - raised 810 mn of tier I capital @ Rs 34 per share

*PE investors - HDFC, Khattar Holdings, Amtel Finance, etc aggregating 15% stake

# Tata Capital, India Capital Opportunities, Al Bateen Investment Company

(Abu Dhabi), Tata Investment Corporation, etc.

Source: Company

The banks 80 branches are concentrated in Gujarat, Maharashtra and Andhra

Pradesh.

Figure 26: Branch network (FY11) Figure 27: Break-up of loan portfolio (FY11)

Source: Company Source: Company

Gujarat , 17%

Maharashtra, 44%

Andhra Pradesh, 12%

New Delhi, 8%

Other regions, 19%

Corporate loans, 26%

SME & Micro SME

Loans, 24%

Retail loans, 30%

AMRB loans, 20%



Annexure: Financials

Source: Company, CRISIL Equities estimate

Income Statement Balance Sheet

(Rs mn) FY09 FY10 FY11 FY12E FY13E (Rs mn) FY09 FY10 FY11 FY12E FY13EInterest Earned 6,452 4,594 5,363 6,723 8,251 Share capital (FV - Rs10) 1,743 2,000 2,002 2,252 2,252

Interest Expended 4,480 3,174 3,471 4,438 5,407 Reserves 3,642 3,425 3,624 5,293 6,082

Net Interest Income 1,973 1,420 1,891 2,285 2,845 Shareholders Funds 5,385 5,425 5,625 7,545 8,333

Non Interest Income 1,201 1,071 1,121 1,241 1,430 Deposits 46,469 47,873 56,102 66,200 78,116

Fee Income 768 664 661 747 871 Borrowings 4,455 5,035 8,607 8,870 10,682

Trading Gains 20 178 253 288 332 Other Liabilities & Provisions 2,523 2,447 2,800 2,006 4,319

Total Income 3,173 2,491 3,012 3,526 4,275 Deferred tax liability 146 0 0 0 0

Total Operating Expenses 2,269 1,854 2,020 2,196 2,389 Sources of funds 58,978 60,780 73,134 84,621 101,451

Staff Costs 1,049 885 1,064 1,191 1,334 Cash & Balances with RBI 2,869 2,914 4,286 4,235 4,997

Other Operating Expenses 1,220 969 957 1,004 1,055 Balances with Banks & money at Call 3,733 410 585 585 690

Pre- provisioning profit (PPP) 904 636 992 1,331 1,886 Investments 16,217 20,179 22,950 26,149 30,465

Provision & Contingencies 1,619 1,210 568 619 631 Advances 32,740 34,597 42,715 50,656 61,788

Profit before depn and tax (715) (574) 424 712 1,255 Net Fixed Assets 891 771 608 789 921

Depreciation On Fixed Assets 150 154 132 197 250 Other Assets 2,287 1,831 1,912 2,130 2,512

PBT (866) (727) 293 514 1,006 Deferred tax asset 241 78 78 78 78

Provision for tax 15 57 78 95 186 Application of funds 58,978 60,780 73,134 84,621 101,451

PAT (881) (785) 214 420 820

Du pont analysis (%)

Ratios As a % of average assets FY09 FY10 FY11 FY12E FY13E

Return Ratios (%) FY09 FY10 FY11 FY12E FY13E Net Interest Income 2.9 2.4 2.8 2.9 3.1

Net Interest Margin (NIM) 2.9 2.8 3.1 2.9 3.1 Non Interest Income 1.8 1.8 1.7 1.6 1.5

Yield on Advances 13.6 12.3 11.1 10.9 11.3 Fee Income 1.1 1.1 1.0 0.9 0.9

Return on Average Assets -1.3 -1.3 0.3 0.5 0.9 Trading Gains 0.0 0.3 0.4 0.4 0.4

Return on Average Networth -15.1 -14.5 3.9 6.4 10.3 Total Income 4.7 4.2 4.5 4.5 4.6Operating ROAA 3.4 3.1 3.0 2.8 2.6

Efficiency ratios (%) Staff Costs 1.6 1.5 1.6 1.5 1.4

Net Interest Inc/ Total Inc 62.2 57.0 62.8 64.8 66.5 Pre-provisioning profit 1.3 1.1 1.5 1.7 2.0

Non Interest Inc/ Total Inc 37.8 43.0 37.2 35.2 33.5 Provision & Contingency 2.4 2.0 0.8 0.8 0.7

Cost to income 76.3 80.6 71.4 67.9 61.7 Loan Loss Provisions 2.2 1.9 0.7 0.7 0.5

Opex/ Avg. assets 3.6 3.4 3.2 3.0 2.8 Pre-tax ROAA (1.3) (1.2) 0.4 0.7 1.1

Loan growth -19.5 5.7 23.5 18.6 22.0 Provision for tax 0.0 0.1 0.1 0.1 0.2

Deposit growth -23.5 3.0 17.2 18.0 18.0 ROAA (1.3) (1.3) 0.3 0.5 0.9

Equity/ Assets 2.6 3.3 3.0 2.9 2.4

Valuation ratios ROAE (15.1) (14.5) 3.9 6.4 10.3

P/E (x) -11.0 -14.2 52.1 29.9 15.3

P/BV (x) 1.8 2.1 2.0 1.7 1.5 Per share Data FY09 FY10 FY11 FY12E FY13E

P/ABV (x) 2.4 2.6 2.1 1.8 1.6 Equity Shares outstanding (Rs mn) 174.3 200.0 200.2 225.2 225.2

EPS (Rs) -5.1 -3.9 1.1 1.9 3.6

Asset quality Book Value (Rs) 30.9 27.1 28.1 33.5 37.0

Gross NPA (Rs mn) 2,900 3,192 2,636 2,471 2,409 Adjusted Book value 23.6 21.7 26.0 31.5 34.7

Net NPA (Rs mn) 1,271 1,077 413 446 511

Gross NPA ratio (%) 8.4 8.7 5.9 4.7 3.8 Quarterly financials

Net NPA ratio (%) 3.9 3.1 1.0 0.9 0.8 (Rs mn) Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11

Provision Coverage (%) 56.2 70.0 87.6 82.0 78.8 Net Interest Income 420.0 433.0 464.0 493.0 502.0

Change (q-o-q) 31% 3% 7% 6% 2%

Asset-Liability (%) Operating Profit 190.0 226.0 208.0 206.0 220.0

Credit-Deposit ratio 70.5 72.3 76.1 76.5 79.1 Change (q-o-q) 138% 19% -8% -1% 7%

Investment/Deposit 34.9 42.2 40.9 39.5 39.0 Profit after tax -82 -29 48 82 113

Proportion of CASA deposits 31.0 35.4 35.2 35.5 34.7 Change (q-o-q) 55% 65% 266% 71% 38%

Capital adequacy ratio 13.4 14.9 13.3 15.4 14.7 Net interest margin (%) 3.27 3.12 3.14 3.13 3.15

Tier-I ratio 11.6 12.0 11.1 13.4 13.0 EPS (Rs) -0.4 -0.2 0.2 0.4 0.6



Focus Charts

Loan book composition Break-up of total income


DCBs balance sheet - smallest among listed private

sector banks (FY10)

DCBs stock movement vis-a-vis Bank Nifty

-indexed to 100

Source: Company, CRISIL Equities Source: NSE, CRISIL Equities

Shareholding pattern Top institutional shareholders (FY11)

Name of the shareholder % holdings

Al Bateen Investment Co L L C 3.69

Tata Capital Ltd 3.29

DCB Investments Ltd 2.65

The India Fund INC 2.17

Housing Development Finance Corporation Ltd 2.02

Sundaram BNP Paribas Mutual Fund 1.47

Macquarie Bank Ltd 1.13

Source: Company, CRISIL Equities Source: NSE

46%

28% 32% 26% 25% 25%

4%

14%17% 24% 26% 28%

42%

40% 26% 30%30% 29%

8%17%

25% 20%19% 18%

0%

20%

40%

60%

80%

100%


Corporate loans SME & Micro SME Loans Retail loans AMRB loans

50.0% 62.2%57.0% 62.8% 64.8%

43.6% 50.0%37.8% 43.0% 37.2%

0%

20%

40%

60%

80%

100%

FY08 FY09 FY10 FY11 FY12E

Net interest income Non interest income

62 81

105 116 220 255 271 339 354

364 374 425 438

1,807 2,226

3,639

0 1,000 2,000 3,000 4,000

DC BDhanlakshmi Bank

Lak Vilas BankCity union bank

Karur Vysya bankSouth Indian Bank

Karnataka bank

ING Vysya BankIndusInd Bank

Yes bankKotak Mahindra bank

J&K BankFederal Bank

Axis bank

HDFC BankICICI Bank

(Rs b

n)

0

50

100

150

200

250

300

350Ap

r-09

Jun-

09

Aug-0

9

Oct

-09

Dec-

09

Feb-

10

Apr-

10

Jun-

10

Aug-1

0

Oct

-10

Dec-

10

Feb-

11

Apr-

11

Jun-

11

DCB NIFTY

23.1% 23.1% 23.1% 23.1% 23.1%

2.7% 4.9% 3.6% 8.3% 8.3%8.1% 3.4% 6.2%

3.5% 1.9%

66.1% 68.6% 67.1% 65.2% 66.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mar-10 Jun-10 Sep-10 Dec-10 Mar-11

Promoter FII DII Others


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