DCB Bank

DCB Bank achieved its highest ever profit after tax in Q4 FY26 at INR 206 crores, contributing to a record full-year PAT of INR 732 crores. This marks the third consecutive quarter of record profits, demonstrating consistent performance. The bank reported a 16% income growth against an 11% expense growth, leading to a 25% increase in full-year operating profit, the highest in 8 years. The full-year Return on Equity (ROE) stood at 12.77%, which is the highest in 11 years and since the bank became a full tax-paying entity.

Advances grew by 18% on a year-on-year basis and 6% sequentially in Q4 FY26. Deposits demonstrated even stronger growth, increasing by 21% YoY and 7% QoQ, consistently outpacing advances growth. The bank continues to focus on granular deposits, with the top 20 ratios well under 7% (6.55% against 6.61% last year). This growth is attributed to chosen products like mortgage, corporate, gold loan, agri, and construction finance.

Asset quality showed substantial improvement, with Gross NPA at 2.45% and Net NPA at 0.89%, both reaching 7-year lows. The full-year credit cost was 40 basis points, well below the guided 45 basis points. Upgrades and recoveries during the quarter were 109% of fresh slippage, and the slippage ratio decreased to 2.28% from 3.09%. Management emphasized a shift to managing 1 DPD (day past due) and improved early bucket collections as key drivers for this performance.

Net Interest Margin (NIM) expanded to 3.39% in Q4, an increase of 12 basis points sequentially and 10 basis points year-on-year, despite a 25 basis point repo rate cut. This was partly driven by a product mix shift towards higher-yielding assets and away from lower-yielding co-lending. The cost of deposit in Q4 was 44 basis points lower YoY. While the bank expects deposit repricing benefits to continue until late Q2/early Q3 FY27, management expressed dissatisfaction with flat Current Account (CA) growth, which is a focus area for future NIM improvement.

The bank's cost to average assets for Q4 was 2.47% and 2.5% for the full year, with management confident in maintaining this level going forward^⏳. The cost-to-income ratio decreased by 300 basis points year-on-year. Employee productivity is at a historical high. The bank plans to increase its headcount to approximately 13,000 by the end of FY27, primarily for liability and deposit acquisition in branches and distribution. There is also a high probability of crossing the 500-branch mark this year.

DCB Bank plans to undertake a fundraising exercise in the next 2-3 quarters, specifically targeting late Q2 or early Q3 FY27, with an expected amount of INR 1,100-1,200 crores. This is intended to support continued asset growth and maintain internal capital adequacy targets. The co-lending book, which was 108% in FY25 and 24.9% in FY26, is expected to grow at a rate similar to the overall asset growth of the bank in FY27. The bank is also revamping its SME book, which has seen a 13% YoY decrease, by introducing a new vertical for larger ticket sizes.