Summary
DCB Bank Limited - Q3 FY 2026 Earnings Call Summary Friday, January 23, 2026, 5:30 PM IST
Event Participants
Executives 4 Ajit Kumar Singh (Chief Investor Relations Officer), Praveen Kutty (MD & CEO), Ravi Kumar (CFO), Sridhar Seshadri (Whole-Time Director)
Analysts 8 Aditya (Securities Investment Management), Akshat Agrawal (SMIFS Institutional Research), Dixit Doshi (Whitestone Financial Advisors), Jai Mundhra (ICICI Securities), Khushwant Pahwa (KPAC), M.B. Mahesh (Kotak Securities), Nitin Aggarwal (Motilal Oswal), Rohit Arora (Individual Investor), Ravi Purohit (Securities Investment Management), Suraj Das (Sundaram Mutual Funds)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Customer Deposits | ₹65,000+ crores | +19.54% YoY; growth supported by repricing and granularity. |
| Customer Advances | ₹42,000+ crores | +18.46% YoY; driven by Business Loans (BL) and Co-lending. |
| Profit After Tax | ₹184.74 crores | +22.0% YoY; impacted by a ₹26.87 crore one-time labor code expense. |
| Net Interest Margin | 3.27% | Improved due to 10 bps drop in Cost of Deposits (CoD). |
| GNPA | 2.72% | Lowest in 18 quarters; significant improvement in asset quality. |
| Net NPA | 1.1% | Lowest in 11 quarters; targeting sub-1.0% in near term. |
| Slippage Ratio | 3.08% | Lowest in 18 quarters; highlights better vintage performance. |
| ROA / ROE | 0.91% / 12.73% | Adjusted for one-offs, ROA would be 1.01% and ROE 14.10%. |
| Cost-to-Income | 61.84% | Lower YoY; bank operated with fewer employees than Q3 FY25. |
| CRAR | 18.0%+ | Capital remains adequate; Tier-1 at 14.0%+. |
Geographic & Segment Commentary
- Mortgages: Grew 12.4% YoY, slower than the bank average as management purposefully pivoted from Home Loans (HL) to Business Loans (BL) and reduced DSA sourcing in favor of organic leads. Average ticket size increased 19% from ₹27 lakhs to ₹32 lakhs.
- Co-lending: Currently comprises 16% of the total asset book, largely driven by gold loans; management intends to cap the total share at 15% by March 31, 2026, to align with overall bank growth.
- SME/MSME: Segment growth has been range-bound at ~₹2,249 crores; management is currently building out specialized teams across 10 locations to drive future trade finance and working capital scale.
Company-Specific & Strategic Commentary
- Product Mix Optimization: Actively shifting from Mortgage HL to BL and increasing ticket sizes to improve yields and customer longevity. BL now constitutes over 60% of incremental mortgage sourcing.
- DSA Reduction Strategy: Moving toward organic sourcing to reduce “churn” and foreclosure risk; non-DSA sourced accounts show significantly higher retention and lower customer acquisition costs over the long term.
- Digitalization & Efficiency: Operating with 10,981 employees (up slightly QoQ but down from 11,339 YoY) while growing the balance sheet by ~19%; focused on “war on paper” and AI-driven vendor renegotiations.
- Liability Granularity: Top 20 deposit concentration reduced to 6.61%; convergence of peak retail rates with larger peers (now only 60 bps difference) indicates a stronger brand-led franchise rather than price-led.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Loan/Deposit Growth | 18% - 20% YoY | Consistent with current run rate and economic demand. |
| Return on Equity (ROE) | 13.5% (FY 2027) | Based on margin stability and credit cost management. |
| Return on Equity (ROE) | 14.5% (FY 2028) | Driven by operating leverage and increased fee intensity. |
| Co-lending Share | <15% of AUM | Plan to stabilize co-lending growth in line with total book growth from FY26. |
Risks & Constraints
| Risk | Context |
|---|---|
| Labor Code Impact | The bank took a ₹26.87 crore one-time hit this quarter; incremental quarterly impact is estimated at a manageable ₹1 crore. |
| Interest Rate Lag | A 25 bps repo rate cut impact will hit yields in Q4 FY26; however, term deposit repricing is expected to provide a tailwind through H1 FY27. |
| CASA Stagnation | Current Account (CA) growth has been flat; management is prioritizing a new senior hire to revitalize this low-cost segment. |
| Regulatory/ECL | Transition to ECL is 5 quarters away; management remains confident that current PCR and low NNPAs mitigate large one-time hits. |
Q&A Highlights
Fee Income Sustainability
- Question: What is driving the 15% QoQ fee growth? (Akshat Agrawal)
- Answer: Strong third-party distribution and processing fees. Management targets a fee income of ~1% of average assets consistently (Praveen Kutty).
Margin Outlook
- Question: How will the rate cut cycle affect NIMs? (Aditya)
- Answer: NIM expansion should continue through Q1-Q2 FY27 due to the long duration of term deposits repricing downward, offsetting yield pressure from the repo cut (Praveen Kutty).
Borrowing Reduction
- Question: Why is balance sheet growth (14%) lower than credit growth (18%)? (Akshat Agrawal)
- Answer: The bank used excess liquidity/deposits to pay down expensive borrowings from ₹8,400 crores to ₹4,700 crores, which improved the NIM (Praveen Kutty).
SME Demand
- Question: Is there real demand on the ground for SME products? (M.B. Mahesh)
- Answer: There is high demand for installment loans. Competition is stiff; if the bank does not disburse quickly, customers have multiple alternative offers (Praveen Kutty).
Key Takeaway
DCB Bank delivered a resilient Q3 FY 2026 performance characterized by its highest-ever quarterly profit of ₹184.74 crores and an 18.5% YoY advance growth. Despite a one-time ₹26.87 crore regulatory expense related to the new labor code, the bank achieved an adjusted ROA of 1.01%. Strategic shifts are proving effective as management reduced expensive borrowings by nearly ₹3,700 crores and narrowed the gap between its deposit rates and larger peers. Asset quality reached a multi-year high with GNPA at 2.72% and slippages at an 18-quarter low. The bank remains focused on pivoting the mortgage portfolio toward higher-yield Business Loans and organic sourcing to improve customer retention. Management maintained its guidance for 18-20% growth and an ROE of 13.5% for FY 2027, provided the momentum in term deposit repricing and credit cost containment continues.
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