Shares of DCB Bank nosedived nearly 18 per cent in intra-day trade on Wednesday after the private sector lender reported lower-than-expected earnings in June quarter (Q1FY19) led by fall in credit growth, rise in fresh slippages and weak non-performing assets (NPAs).
Reacting to Q1 numbers, share price of DCB Bank tumbled as much as 17.83 per cent to touch an intra-day low of Rs 196.20 apiece on the Bombay Stock Exchange (BSE) after making a bearish start at bourses. By the time of reporting, the scrip was trading at Rs 200.90, down 15.87 per cent.
The stock saw surge in selling volume with 11.64 lakh shares have changed hand over the counter as compared to two-week average of 1.14 lakh shares on the BSE.
The bank reported first quarter earnings after market hours on Tuesday with its profit growing by 17 percent to Rs 81.1 crore in Q1FY20, while net interest income increased 11.7 per cent to Rs 304.8 crore.The provisions and contingencies of the bank increased to Rs 40.64 crore from Rs 33.23 crore in the year-ago period.
"DCB Bank's Q1FY20 profits at Rs 81.1 crore were well below our estimates driven by a miss on the topline. NIM declined by 11bps Q-o-Q as the bank focused on raising retail term deposits, as well as due to the higher cost on long-term borrowings raised in mid-FY19," JM Financial Institutional Securities said.
The brokerage downgraded stock to 'HOLD' with a target price at Rs 230, which the stock has also already touched in opening trade, saying that the bank may see headwinds over the next couple of quarters with regard to growth, margin and possibly asset quality.
DCB Bank's asset quality declined during June quarter, with gross non-performing assets (NPAs) ratio - bad loans as a percentage of gross advances - rising to 1.96 per cent versus 1.86 per cent in the year-ago quarter. Net NPA expanded to 0.81 per cent during June quarter as compared to 0.72 per cent in the corresponding quarter last year.
The brokerage has also cut earnings per share (EPS) estimates for the bank by 11-16 per cent for FY20-21E to factor in the miss on net interest margin and growth.
DCB Bank has returned 41 per cent current year-to-date and outperformed NIFTY BANK by 29 per cent. "At current market price, it trades at 2x FY21E P/BV and 15x FY21E P/E which leaves little room for upside for FY21E RoEs of 14 per cent, it said.
Edited by Chitranjan Kumar