DCB Bank to go slow on branch expansion for next two years: CEO Murali Natrajan
DCB Bank to concentrate on improving profitability from existing network of around 300 branches
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Mumbai: Small sized private sector lender DCB Bank will slow down on its network expansion for the next two years to concentrate on improving profitability from existing network of around 300 branches.
“We have added branches at a faster clip in the last two years but will slow it down to 10-15 each in FY19 and FY20,” DCB Bank’s managing director and chief executive Murali Natrajan told PTI. He said the bank has added 90 branches in the year to June 2017 to take it to 290, and will close FY18 with about 310 branches. By FY20, the bank will have only 350 branches.
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“The number of branches depends on what you can do from a cost to income ratio front,” he said, adding that the decision is not driven by the advent of digital alternatives.
Natrajan said the bank had aggressively expanded its branch network to have a size which is “meaningful” among the small-size lenders and despite the expansion, the cost to income ratio has been maintained at 57.2% in Q1.
The bank reported a 38% increase in its June quarter net at Rs65 crore, boosted primarily by a Rs21 crore treasury income.
The asset quality was under check, but the provisions increased by over 70% to Rs35 crore.
Natrajan explained it, saying this is the result of extra provisioning done because of the bank’s exposure to the SME sector which is prone to stress. He said the bank started creating floating provisions three years ago and the buffer stands at Rs44 crore at present with no draw down done. It is targeting for a 20-25% growth in credit in FY18, Natrajan said.
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The net interest margin expanded to 4.2% on the back of a jump in the share of low-cost current and savings account deposits to 26.85% and the Rs378 crore capital raised earlier this year.
Natrajan said they expect some pressure on the spreads due to aggressive competition from banks and non-banking lenders, but added that the bank is comfortable with NIM at 3.75%. The promoters’ stake has come down to 15.02%, and they will maintain the same now on by participating in any capital raising exercise in future, he said.