DCB Bank Limited (DCBBANK) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the DCB Bank Q4 FY26 earnings conference call hosted by AdFactors PR. Joining on the call is the senior leadership team of DCB Bank, Mr. Praveen Kuti, Managing Director and CEO, Mr. Sridhar Shishadri, 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 lesson-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 Kuti, Managing Director and CEO from BCB Bank. Thank you, and over to you, sir.

Thank you, Yusuf. Good evening, ladies and gentlemen. Welcome to D.C. Bank's Quarter 4 Learnings Call. In line with what we said before, consistency, predictability, repeatability are very critical to us. This is the eighth successive quarter I have 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 206 crores and the full year is at 732 crores, 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 the 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 YOY basis and 7% in sequential quarter. We continue to ensure that the deposit growth outbases 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, which are secured, small ticket, and granular. 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-rending book at the end of the year would be less than 15%. It is at 13.9%. Actually, the co-rending 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 impact happening in Q4. Treasury held 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 198 crores, which is the highest ever. Gross NPA coming to the portfolio quality is at 2.45. Net NPA is at 0.89, both of which are at 7-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 I had assured that there is no way we are going to be higher than 45 basis points credit cost for a year, and we are clocked in 40. Our upgrades and recoveries during this quarter was... 109% of fresh slippage. Our absolute gross NPA of 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 for the full year is 2.5%, despite taking what we took last in Q3, 27 crores, because of the new wage code. And 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-a-vis DSA. We see the benefits of these flowing in. Our employee productivity is historically the highest. Our office cost increases our marginal. Remember, 16% growth in incomes, 11% growth in expenses widening jaws. We've been able to drop moderately on the yield advances due to the rate cuts to a certain extent by the gains on yield on account of the mixed change. Over the year, Q4, last year was Q4, this year, the yield advances has decreased by 56 basis points, despite we having a 100 basis point rate cut applicable for this financial year. In Q4, our ROE 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, it's the highest ever since the bank became a full-tax-paying entity. That's all in the past. On a go-forward basis, the fundamentals of business are... That we have sold and harvested for several years, continuing to bring in consistent, predictable, repeatable outcomes. We are confident that it should continue in the future as well. There are clouds on the horizon on account of West Asia crisis. We are being cautious. We have overstocked on our liquidity. We have done detailed assessment, and we don't see an immediate impact on...

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 1 on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. 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 Agarwal 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. My first question is on margins. NIMS have continued their robust support trajectory and previously had guided for benefits from the deposit repricing to continue until Q2. So, if you can get some color on the repricing benefit, which is still pending, and how is the bank progressing on HL2BL 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? So, that's the answer to your first question. HL to BL is much more than that. It's like we're almost 70-30 and that's really helping us. It's helping us in terms of, you know, yield. It is helping us in terms of... Credit costs, and the fact that we have also gone slightly higher ticket size has helped our costs consistently, and that possibly is reflecting in the new slippages coming down from 3.09 to 2.28. It's certainly a part contributor 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 to 55 bits, the business model guidance, barring this West Asia conflict?

As of now, we're sticking to the below 45 bits. See, currently we are at 32, 33 pips. 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 55. 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 wouldn't have any reversal coming through.

Very well, sir. In terms of fee growth, which has been very strong for many quarters now and the latest quarter at 9% QQ, what are the key drivers for this quarter and how should we see sustainability going forward? Is this still a third-party distribution or is there some other drivers? So, if you can help with some color, sir, thank you.

It's the same. The leopard never changes the spots. We don't feel like that. Nothing happens all of a sudden. We continue to be high on third-party distribution. Forex income is decent. Trade is an area of concentration. The repeatability of income is something which we are focusing on. Treasury gave us nothing in Q4, nothing. And we expect that trend possibly to continue. So, core fee income is a key driver for the fee going.

Right, sir. And my last question is on branch expansion and headcount. So, what's your outlook going forward? I understand you added 11 branches in 4Q and employees around 400 on net basis. So, how should we think about investments on this front going forward?

See, if you see a number of employees, if you see a U-shape coming through, so if you were to see the number of employees that we have in, let me get the year right, 24. Now, the September of 2020, 5,900 people. We're going 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 assisted sales. So there will be more people coming in. Branches are optional. I mean, we don't necessarily need to have more branches to grow. People are required. But 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.

Thank you. Next question is from the line of Path M. Gutka from 361 Capital. Please proceed.

Yeah.

Hi, sir. Thank you a lot for the opportunity. My first question is on the day.

Sorry to interrupt, Mr. Path. 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. Park?

Yeah, yeah.

Yeah.

Can you hear me now? Yes, we can hear you now. Please proceed.

Yeah, yeah, yeah. Okay. So, my question was in mind. If I look at your yield on advances, it's flat quarter on quarter. You know, cost of funds have declined slightly. You know, the liquidity on the balance sheet has, you know, gone up quarter on quarter. So, you know, so ideally margins should have been, you know, not improved by 12 bits, or should have improved marginally, is what the calculations suggest. So, are there any one-offs in the margins?

No, there are no one-offs in the margin. We don't, we're 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.

Okay. And my second question was, the cost to assets, you know, 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 at 2.4.

Okay. So, what is the further, you know, further juice left here or, you know, what will lead to the further improvement of cost to assets from here on?

See, this is a bit like the earlier question which was asked on credit cost. Modules suggest 45-55 bills of credit cost. Modules suggest, you know, 2.5% of cost to average assets. In reality, we are slightly better than that. We are very happy at 2.5. And remember, there is going to be an increase in the number of people, which will also result in more productivity. It's already been one, so there will be a linear increase through the year of number of people. So, those investments are critical, and despite that, we are reasonably confident of a 2.5% cost average. Okay, perfect.

Okay, and just one last question if I can squeeze in. You know, because, you know, the war was persisting, you know, large part of the March month, have you tweaked any of your risk filters while sanctioning and disbursements to, you know, 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 operational productivity exercise that has resulted in lower bounces. We sacrifice a bit of a yield, but we're getting better quality customers, and that's reflecting on fresh slippages being better. And all these things happened much before the war actually manifested. So now, you know, see, if this continues, it will affect everybody, but people at the lower end of the economic pyramid will get impacted more. So there's not a specific problem we'll have. If hydrocarbon prices go up, everyone is going to get affected. And the effect will Thank you. By people who do not have the security of a cushion to take care of this extra expense, we will hit their monthly bills. So 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. Do not have a reaction to the war at all. It just so happened that...

Sure, sir.

Thanks a lot, sir. Thank you. Next question is from the line of MB Mahesh from Kotak Securities. Please go ahead.

Raveen, hi. Just two questions from my side. When you speak to your collection teams and when they're 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?

I think, let me ask you the first question first. So, 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 day's past due. And when we made the statement, we already implemented that. So, we did put in more people. We significantly improved our early bucket collection. The intensities increased significantly. And what you see in March is the result of those activities which lived in somewhere around June, July, and then persisted with it. That's the way I see it. So, it's more of intensity. It is more of, you know, more of focus. In the earlier buckets, which we were not really focused upon. Otherwise, your slippage ratio would never have come down. I mean, you could have any kind of recovery, 109% recovery. This will help the NMPA, most certainly, but that will not help the slippage. One particular metric you can look at is, for the first time, we're given slippages of gold loans separately, okay, in the investor presentation. Now, that clearly is an indicator of the pressure in the market because we don't do early bucket collection in gold loan. It's not worth our while because the gold is there. Why call on the 30th day and that's an operational cost? So there's 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. And if you were to look at that page number, I think it is 26, okay, the bottom left-hand corner. You can see there's 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. And there's a natural repayment or natural... Slippage, which really happens. The real action happens near NPA rather than the beginning.

Perfect. Thank you. And to the question that you're seeing with respect to the portfolio that you're carrying today versus where you were probably about two years back.

See, two years back, our credit cost was in the region of 0.38 and 0.42. Currently, we are at 0.4. So, what we have done is we have ridden the wave. So, if history were to repeat, we will also repeat the particular performance. So, you see, marginal increase in our credit cost still will be below 45 bits. But there's a very strange statement to make because if freight prices were to shoot up, you could see a situation whereby inflation really, really is impacted. Second-order issues of petrochemical-oriented products not coming to the market could keep the supply chain inefficient. So it is not just about inflation alone. It's about, you know, everybody's impacted. And unlike COVID, you can't throw, you can't do quantitative easing and get out of this. You will have to, and it's not going to be that easy. So, but at the moment, it's good to be in a position where your slippage ratios are lower, where your NNPS 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 are similar to where they were two years back, or they are better or worse? What's your assessment of the customers that are coming to the call?

So the reason I'm not able to give you a straight answer is the customer's stock which we had two years back is very different from the customer's stock that we're 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. MFI book has dramatically come down. At one point in time, it was 1,400 crore book. Now, it is some 600, 700 crore book. So, it's not the same. I mean, 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. Thank you.

You're welcome.

Thank you. Next question is from the line of Rohan M from Equira Securities. Please proceed.

Good evening, sir. Thanks for the opportunity to congress on good set of numbers. Thank you very much. This is on the EELTS. EELTS is plattish Q1Q. And what we had explained earlier in the conference is we ask book on the mortgage specially that is fixed or floating. When we see gradual reprising over some period, so with repo cuts happening, what has helped us such an yield at this level, especially with corporate dispositions also picking up? So have we taken any increase in spreads on incremental lending, or what has helped us explain that?

Yeah. So, 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. So, this is a product mix game. So, 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 higher-yielding book has grown, which has resulted in incremental yield being higher, and it has absorbed the 25 bits. RedWebEB's repo rate cut, the full impact of which we had in Q4.

Sure. So, secondly, if you look at slippage's goal, it has fallen to 1.5%. 1.5%. 1.5%. So, just trying to get a sense, like, given how the macro is evolving right now, and there's uncertainty on how things will shape up. Given your interaction with the clients, like, is this sustainable going into F-127, especially with negative slipperages, if this thing continues in F-127?

What? Very difficult to answer because, you know, there are so many unpredictable, unponderables there, but, you know. What you see day one is very different from what you see on day two, right? There is so much change happening, which makes prediction really, really, very difficult. But what I'm confident of is that I don't see our NetNPA. Going back above 1%. We said that, I don't 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. But 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. But that is not a guarantee for the future.

Sure. And so lastly, what will drive your NIMS towards your business model NIMS target of 352, 365? And what is your timeframe expectations around that?

See, if there is one thing I'm not happy in a very decent quarter, or a decent year for the matter, is there are so many things which are good. One thing which I'm not very happy about is the current account pickup. So we are focused on it. Our SAR growth is 10%. Our car growth is flat. And that's not a good thing to happen. We're putting resources behind it, we're putting effort behind it, we're putting focus behind it. That has to improve. And practically everything that we put focus on, you see an improvement happening. It's time, it happens in the current account portfolio as well. So that's one big driver. We've really moved the needle on engagement with our savings customers. You know, there is a whole host of cross-sell activities happening on our customer base. It's still a snowball. It hasn't reached the 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're seeing the result of it now. So we are at it. We just keep progressing on the right path. Trust the process and the results will happen.

Sir, thanks. Thanks for the opportunity.

You're welcome.

Thank you. Next question is from the line of Jai Muntra from ICICI Securities. Please go ahead.

Hi, good evening, Praveen. Thanks for the opportunity. Sir, I have a few questions. One is, if I look at your slippages number, right, so just the broad calculation, slippages, overall slippages are, 2.28, excluding growth, gold is 1.47, and gold is 5% roughly. I mean, the number somehow does not tally in the sense that gold is supposedly less than, I mean, if I do the reverse calculation, it looks like gold is 20% of the portfolio to drive that change from 2.28 to 1.47. These are gross slippages number only, right? So that is why I'm assuming these are gross slippages, 1.47 and 5% of gold.

That's right. These are actual numbers. I can put you onto my finance folks or collection folks and can have a discussion on that. I can take you through the numbers. These are 2.28 is our slippage. It's come down from 3.09.

Right. Okay. So that is anyway, so I'll check that offline. Second is on the growth front, right? So we have done 18% growth, which is much faster than the industry. But somehow, as you also mentioned in the opening remarks, the co-lending has declined QOQ. 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. And, as you said, co-lending, I believe this co-lending is a function of CLM transition. So, how should we look at the next year going ahead when, you know, mortgage is 10-11% and MSME is still yet to pick up?

And, so far, the growth has been coming from here. Let's look at that. Let's look at that. It's a good question. And, I'm sure my answer will help a lot of people in this call. Can we look at Q quarter? Okay. Look at the quarter and look at the mortgage growth in the quarter. You want me to tell you the case number?

Yes, so 3.8%.

For sake of argument, let's say 4%. And if you have to multiply by 4, you're talking about 16. So 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 is contributing to delinquencies, it is a lower ticket issue which is vulnerable. So we have really, really turned, changed the wheels of the train while the train is still moving. And you haven't felt it because other products contributed to that particular growth. Now what's happening is... A better BLHSQ, a better self-sourced versus DSA-sourced mortgage is up and running, and every quarter, that growth is better than the previous Q&Q growth. So, what you have 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. And 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. Yes, sir. This part is understood. Yes.

So, clearly, there is a take-off happening on that count. So, my finance folks have just come in with some broad math. Can I go to the earlier question? Sure, sir. All right. So, so, one, sorry, Vishal, you want to explain this?

Gold have a weightage of 21% and a slippage of 5.3%. And other than gold have a weightage of 79% and a slippage of 1.4%. So overall, it's coming from 4.8%.

No, sir, you're right. If the gold weightage is 20%, then it's the match.

21.21%, so that covers the discussion. Okay, so that's the second question. Now, can I ask you a question, Jay? Do you remember in the investor day, we were standing outside, and then you told me, at that time, our NNPA was 1.22%, and you told me, for a business of our type, you removed the 22 basis points from the ROA. Do you remember the conversation? Yes, yes, I do, sir. Okay, I want to tell you, you don't have to do that anymore. We are at 89 bits.

Thank you, congratulations on the year.

No, no, no, 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. So now we're at 89 BIPs. So 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. And you'll see that coming through in the next few quarters as well.

Thanks, sir. Well appreciated, sir. Yes. Okay. No, sir, sorry, just to come back. So, gold loan proportion is 20-21%, but in this table, the advances mix, the gold loan proportion looks like, you know, 7-8%. So, I believe the coal ending plus gold plus it is also sitting somewhere. Absolutely.

See, coal ending, we have about 8,366 crores of coal ending, bulk of which is gold, and then you have normal gold, our own gold of about 4,000 odd crores.

Right. Okay, sure. And, sir, then... Going ahead, so mortgage, I take your point, sir, that mortgage has accelerated and maybe it will sustain. But if the other piece, I mean, so far this quarter, the growth has also been contributed by corporates and MSI institution, which may or may not be desirable or, you know, you can still sustain. But I'm saying that in case of co-lending not being a meaningful contributor to the growth, which portion will do the heavy lifting apart from that?

So I want to repeat what I said earlier, consistently being saying throughout. We had, and I will tell you this, our co-ending growth in 24-25, it is not in this book, but if you have to look at the previous book, it was 108%, 108%. This year, it is 24.9%. That is 25-26. In the current year, 26-27, I am not telling you the percentage, but it will be exactly the same as the overall asset growth of the bank. Are you with me? 108 has been brought down to 24.9 and in the current year, 26-27, co-lending growth will be exactly similar to the overall asset growth of the bank. So that's one part of it. It will not be zero and it's not even advisable. So it will be the steady normal growth happening there. You will have growth coming in from the mortgages, and 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. So, we will see contribution coming in from these core segments. The agri segment, I don't know how fertilizer prices will be affected by this. You know, this West Asia crisis. But assume that life is normal, I would tend to think that tractors, KCC growth will happen. I'm not a big fan of MFI. We do MFI only to meet the small farmer, marginal farmer requirement. It's not meant for balance sheet growth or you have to do it, you have to do it. The history has not proved very good either for us or for the industry. But yeah, so it will be... The MFI growth, sorry, the BC MFI growth will be sufficient to meet our small farmer, marginal farmer appetite. So that's the way we see this. So I take, I mean, do the math. 6% is a quarter and quarter growth. You remove co-lending. It comes to 8.6%. Non-co-lending growth. 8 points? I'm not saying 8.6 into 4. I wish I could say that. My senior leadership team is also sitting here. I mean, just imagine, 8.6 into 4, then I could be leaving home at 4 o'clock every day.

And, sir, any guidance or, I mean, you would, I think in the endless day, you had said that, you know, this 18-20% kind of a growth, we should be delivering over the next, I mean, that still remains a broad guidance, right?

I mean, in these times when there are clouds, etc. on the horizon, 18, we are cautious. We're very, very, I mean, we also, we only know the pains of getting... 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. So these are hard, not to talk about slippage, we are hard-earned lessons. So 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... As far as the portfolio is concerned.

Right. And last question, sir, on co-lending CLM change. You know, correct me, my understanding is that it has now changed from non-discretionary, sorry, discretionary to non-discretionary. And which is why you may have some disruption in the current, in the March quarter. Has that been sorted already or do you believe there could be some more peathing issues when you align towards the new guidelines?

Jay, 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 partner's 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, very, very well with them. And probably, since we're 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're very comfortable with them. They are very comfortable with us. And I'm sure some of these guys are part of your coverage.

No, sir, just to coming to the question is, the disruption, the transition is over, and even incrementally, I mean, you said that coal ending will be growing as much as the overall growth. So, I would believe that the entire transition is over, right? And there is no more…

Yes, yes. For us, why I am not giving you a straight answer on that is, it is over for gold. It is not over for, we do educational insurance financing, we do school financing, we do LAP, we do, 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, it is a lion's share of a co-lending. We are very comfortable. And the reason why gold loan is a lion's share of gold lending is because you can accurately predict the loss.

Does this change anything, sir, especially in the transition? One is, I believe you may not have a discretion in terms of how you partner with the partner. Is there anything also changes or not?

We had this partnership, Jay, with one of our partners from 2022. That partner was our single largest partner. Until February of 2024. Then we had a second big partner coming through. So, we are talking about four-year history, we are talking about two-year history, and there is a, you know, we, it's like a full-fledged, I mean, I can do a PhD on gold co-lending, at least. Right? So, these are kind of relations and partnerships that we have for a, for a... Thank you for the co-lending part. I don't see any disruption coming in, sorry.

If I may ask. Why is there a seasonality in the fourth quarter? I mean, is this a normal seasonality in terms of lower slippages, higher recovery, or there is something more fundamental in the product that we have? I mean, all banks have seasonality, which is favorable seasonality in 4Q, but for our case, it looks slightly more pronounced. So, any reason or it's like business as usual? Thank you.

Our appraisal is in April.

I can't take up any reason, Jay. Sorry. Okay. No issue, sir. Thank you and all the very good stuff. Thank you.

Thank you. Next question is from the line of Aditya from Securities Investment Management. Please proceed.

Yeah. Hi, sir. Thanks for the opportunity and congratulations on the good side of the results. Thank you very much. Bye-bye. First question was on NIMS. How should we see the NIMS trajectory now from here on? So do you see them still improving? Because while your deposits are still getting deep ice, but your CASA share has been reducing, rates industry-wide have been hardening, and also your reliance on BIL deposits have been increasing. It is now 20% of your deposits. So how do you see the NIMS for the bank going forward?

I wanted to focus on cost and deposit, because the ultimate truth, which is a mixture of the cost, institutional deposits, you know, excess... This is the trend line of the cost and deposit. Our belief is that if you were to renew as much as we renew normally, we should be having some advantage going all the way to Q2. After that, that advantage will stop. But that's only part of the story. In the investor day, I had mentioned this. And 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 at the composite peak retail term deposit rate. Compare that with DC banks and see how convergence is happening. The number, the difference between the composite weight of this The six largest banks in India and us, at one point at a time was about 1.27. It was 0.89, if I remember right, in March. It's there in my investor day presentation. It was 0.89. We brought it down to something like 0.60 or 0.61. And it's publicly available. Why I'm not doing bulk deposit is, I'm not aware, because many banks don't publish that. We do. Right? So, that way it's slightly unequal. But this is an indication. One is a longer-turner deposit, necturity, and you're 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 rate. 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, 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. And it's been hard work for the last one and a half years. Our branch bank team has done a fantastic job of switching it. And 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. Look at... Similar size, even bigger size banks, if you're not lower than them, the distance between the two has dropped. So that's how we're seeing it. And 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. But we're not people who give up easily.

But now, sir, I understand that we have been more aggressive in cutting rates as compared to other banks. But now, when I look at the deposit growth, so that is majorly coming from buy deposits. Our retail deposits have not been keeping up pace with the overall deposit growth. So how do you see that going forward?

For us, there are two things which really, really matter. In the order of priority, we should be liquid. Being liquid is not a choice. Pure play liquidity is important. Cost of deposit is important. Long tenor is important. Now, if you meet these conditions, frankly, is there a saw coming in? It really doesn't matter. There was a time when the bank used to give 8% rate on savings account. Today, I think it gives 6.7%. Okay, that's a 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 Ka is an equal story. You can compare Ka across. 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 itself 6.7%. So it is really expensive. But it helps in terms of saying publicly Ka Sa ratio is good. I would tend to think you should look Ka and Sa separately. Look at the, while we don't publish it, our Sa. Average, weighted average pricing on a saw has come down significantly. I mean, if 25 basis point rate cut happened and we have reduced our cost of deposit in Q4, which is a traditionally very liability hungry market, it comes because we are getting the right kind of deposit.

And just last bit on this deposit part. Now, BCB is generally known for being focused on granularity, either being on advances or on deposits. Now, bulk deposits is currently 20%. So, is there any percentage beyond which you won't be comfortable growing bulk deposits?

Like I told you, we have to ensure that getting, if you get a bulk deposit, which is, 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. So, it is an uneven battle. We have triangulated these three things. Earlier, we should take a scan 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. 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 deposit down.

Sure, sir. And, sir, on your ROA, so for your ROA to improve from here, I believe NIMS would be the major lever for us to grow because the credit costs and OPEX costs are pretty much under control. And for the NIMS to improve from here, would cost of deposits be the only trigger for us to improve on NIMS?

Yes. We don't want to go into a higher yield segment. Because this is not really the time to go to a high segment, it comes with a sting in the tail. So improvements will come because we are keeping a tighter rein on the cost deposit.

Got it. And now, sir, on this SME book, this 2,000 crores book, so how big is the trades part? Because we were looking to de-grow that part of the book. And how is the book, apart from trades, growing for us, the CCOD part?

It's not growing. So 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 about, it's a flat kind of thing, quarter on quarter. It has decreased by about 13% year on year. So we're kind of revamping that. We've got a new vertical to look at the greater than 3 crore. Good customers who are above a particular threshold were leaving the bank because it's meant to be a small ticket program. We said, look, that doesn't make any sense. So you're just filling up the bank. So we have got a new, no longer, from July onwards we've been having this channel. It is just getting set and ready. So that's where the momentum we see happening, the SME comeback will happen. Trex is about 300 crore look, so hardly anything. It used to be 300, it continues to be 300, so there's no change.

Understood. And for just last question, what is the bank's position on fundraising? We have got an immediate provision for fundraising, so how is the bank looking?

We should be in the next two quarters, maybe, either late Q2 or early Q3, we should be going in for our fundraise. We see that as a bank, we will continue to grow at this kind of pace, and if we do continue to grow at this kind of pace, with a similar kind of portfolio mix. Probably, we'll reach our internal red flag by Q1 of 2728. We don't want to wait that long. So, maybe Q2 and Q3 beginning.

Sir, thanks, sir, for answering your questions.

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 for participants. Should you have a follow-up question, please rejoin the queue. Next question is from the line of Param Subramaniam from Investec. Please proceed.

Yeah, hi. Thanks for taking my question, and congrats on the water. Yeah. Yeah. So, uh, firstly, um, On the, you know, the board, the enabling resolution for the capital is, so is that an enabling, is it just procedural or are we looking at something, and 1,500 crore seems the largest number.

Yeah, maybe, I'd be happy with something like, I don't know, 1,100, 1,200 crore. Okay. So, it's good to keep some protein-recore enabling relation done, but, yeah, $100 million, not slightly more, maybe, in that particular region. See, 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 release will be at a different level. So, so... Don't over-dilute at this point in time, just do what is required to continue this particular growth moment, and then when the next level of expansion happens hopefully soon, we'll be raising again at a slightly different level with the fundamental numbers looking even better than what is looking today. That's what is driving the management thought process.

Perfect. Perfect. I mean, makes a lot of sense.

Secondly, on your provision coverage ratio, I mean, this quarter, it's gone up sharply.

What level are we broadly comfortable with?

78 plus is good. And as a company, we like to keep those provisions. But anything above 75 is okay. But if you remember, we have some MFI loans had gone bad. In the last year, Q1, Q2, etc. So, we want to ensure that, you know, 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 of Q1, so that there is some evenness in the way things will happen going forward.

Got it. And lastly, this is just, so on the quarter, so your NIM is up 12 basis points, right? Now, is there some day count or something, you know, impacting that? Because, you know, your NII is broadly in line with your loan growth and your asset growth, right? So, 12 basis point uptick, I'm just trying to reconcile with the quarter and quarter 5% NII growth.

See, what I look at is, instead of worrying about, you know, day count, I just compare us with Q4 of last year. Last year Q4, we had 3.29. Neither was last year a leap year, nor is this year a leap year. I think so. So, you're talking about similar connectivity. So, if you're having 10 bips improvement on NIM, despite having a... 100 basis point, repo rate, cut impact, not doing too badly.

I was looking at the quarter and quarter sort of movement. Yeah, quarter and quarter, quarter basis point.

So, I would tend to think, I always look at... Jan, 5th, March is a Jan, 5th, 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 of 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.

Hi. Thank you for taking this. Hi, Akshay. How are you? Hi. I'm good. I'm good. So, Praveen, just wanted to ask, you mentioned increasing employees headcount to 13,000 from current, so it could be around 1,500 addition for the next year. So, 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 fund rate? Because we haven't added employees in the last year or so, apart from this call.

We kept on adding, and we kept on getting red. So, it is not as if we never added. So, our exit process was really sharp and good. But where I see this coming in, it's not for this year. We see practically all these folks going into the... We're 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 that the basic math tells us that between a self-sourcing sales network on mortgages and a DSA-dependent... 2% or 2.5% to the DSA is cheaper. But we've seen that the loan sticks with you for two years, two and a half years. Self-sourcing loans stick with you for six, seven, higher than six 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. The team has shown it to me that from a longevity perspective, from a BT out perspective, from a... 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 a 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.

My second question was on the line of cross-sell. So, you know, at the analyst day, we had indicated of, you know, The DCB NEO cards where we would like to cross-sell, and even in terms of liabilities like OD facility we were wanting to offer. So what kind of progress have we made there?

I'm very happy to say that a sizable chunk of the 3.8% Q-on-Q mortgage growth has come from the branch banking channel. Look, this is bread and butter for most companies. For us, it is not. So, for us, this is a low-hanging fruit that just kind of is kicking in. There should not be news at all. Honestly, this should have been the way things should happen. But, anyway, let's not complain. So, clearly, that is coming through from the branch banking channel, less so from the digital channel. So, that's one. Our credit bureau linked You know, interventions on our liability base is where these LAP loans and home loans are coming through. We're reasonably happy with that. I'm 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 a 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 is no choice. I have to keep at it, and we will see the benefit of it coming through.

Thank you.

Next question is from the line of Puneet Balani from Talat Capital. Please proceed.

Oh, hello, sir. Am I audible?

Oh, you're very much audible. Yes.

Yeah. So, firstly, on the margin front, like this quarter, firstly, if you could explain where the 12-bit QOQ is coming from, and secondly, if you are looking at, you know, from a next year perspective, is it fair to assume that, you know, 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 like margins to be range around these levels because, you know, because of these two factors.

It can happen. I mean, can it be range bound in this particular level? Possible. But like I told the gentleman earlier also, compare us quarter on quarter with the same quarter of the previous year. If it happens, it primarily will be an execution issue because our ability to get the liabilities at the cost that we want. It's a journey that we are taking, and we are very happy with the first nine months of that progress. Our people have learned that you don't need to be the highest rate or one of the highest rate providers to get liabilities into the bank. So, that I would see as an execution risk rather than a strategic risk. So, it's worked very well so far. In Q4, if you 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, you know, a margin, a difference with other banks who had a margin with. It's a good thing going. So there is an institutional resilience building on ability to get lower cost in deposit. No way are we near the big six or big seven. But we are not the band that we were a year and a half back.

Right. And on the growth front, like I know you have mentioned in your presentation that, you know, in three to four years, you aim to double the balance sheet. But given the fact that now you have, the way you have highlighted that the golden book, it is already at a decent base, the co-lending book. 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. I mean, you just look at our March 22 liability numbers and multiply by 2. You just multiply our March 22 asset numbers and see where we are.

Right, right.

59,800 was our asset number in March 22. Today you are 60,000.

Right.

Your liability number was 35,000 or slightly 36,000? Yeah, 35,000 in March 22. Today, you are at 72,000. So that's four years. And that four year, where one year, we were recovering from, our bank was recovering from COVID. So, you know, getting up to speed. So, in that tough times, we can do that. We had a microfinance kind of problem hitting us, a secure DA problem hitting us. Despite all this, we are managing both the credit quality and the growth. These things will happen. 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, right. Oh, okay. That's it from myself, sir. Thank you.

Oh, 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 Mr. Praveen Kutty for the closing comments. Over to you, sir.

Thank you very much for your attention and what's the 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.