DCB has a strong track record of nearly doubling its loan book in 36?42 months on a consistent basis, which was impacted during the pandemic. Loan growth remained muted in single-digits for the pandemic period. Post this, the bank regained its mojo and has delivered strong loan growth over the last three years (FY23-25). In fact, DCB was the fastest growing bank with FY25 loan growth at ~25% YoY. ICICI Securities also highlights that the bank has been posting loan growth >18% for the last 10 consecutive quarters, perhaps the only bank. Co-lending has emerged as the key growth driver for DCB. The share of co-lending has jumped to 13% as of FY25 vs. ~7%/7.5% in FY23/FY24, suggesting strong growth contribution. Excluding co-lending also, growth has been healthy at ~17% YoY in FY25 ? still one of the highest across peers. Going ahead, the bank expects co-lending book growth to be similar to overall loans. We model ~18% CAGR in loans for FY25?27E.
Investment Rationale
The DCB Bank management is re-orienting the bank towards being customer-centric, as opposed to being product-centric earlier. Over the medium term, the management believes this should enable higher customer engagement, enrich depth of relationship, improve cross-selling, lower cost of acquisition andscale benefits and in whole, position the bank better vs. competition. 2) Co-lending share has grown swiftly to ~13% of overall loans; growth here is now likely to be similar to overall loans. Co-lending is slightly NIM dilutive, but has significantly higher RoE. 3) Given the lead-lag on interest rate, NIM may experience pressure, but DCB expects fee/treasury gains and contained opex to cushion the impact. 4) While a large part of the rise in gross slippages (vs. pre-Covid-19) is related to gold loans (minimal impact on credit costs), the bank aims to further tighten its underwriting. ICICI Securities maintain BUY
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