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Shares of private lender DCB Bank surged over 3% to 93.7 per share on the BSE in Monday's early trading session after the bank's net profit for the January-March quarter came at 78 crore, up 13% as compared to that of 69 crore in the year-ago quarter.

The bank's asset quality deteriorated as the gross non-performing assets (NPAs) rose to 4.09% as against 1.96% on a sequential basis. The net NPAs were reported at 2.29% as compared to 0.59% quarter-on-quarter (QoQ).

DCB's provisions for bad loans and contingencies in Q4FY21 stood at 101.18 crore, down from 118.24 crore a year earlier. The lender said it held contingency provision of 229.11 crore against likely impact of Covid 19 regulatory package, impact of the conclusion of the interim order (of Supreme Court on not declaring accounts as NPAs till August 31, 2020 and after) and other contingencies.

On the impact of second wave of the pandemic, it said under the current circumstances the bank during March quarter, on a prudent basis, has made a contingency provision of 124 crore towards further likely impact of Covid-19 on restructured and stressed assets.

Motilal Oswal in the result note said that DCB Bank reported a weak operating performance, impacted by higher interest reversals, while business growth continues to remain under pressure. ''The management guided for muted trends due to a surge in Covid-19 cases and lockdowns in key states, with the near term focus on preservation of the Balance Sheet and controlling risk.''

The brokerage said that it remains watchful on asset quality. Motilal Oswal maintains its Neutral stance on the stock with a target price of 100.

On the other hand, ICICI Securities has maintained Buy rating on the stock. brokerage said that DCB Bank’s collections continued to trend well reaching ~95-96% in mortgage portfolio and non-paying customer pool falling to sub-1% as of March’21; however, resurgence of covid cases may impact collections in near term. It noted bank's stress exceeding anticipated levels and delay in loan growth recovery as key risks for the lender.


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