DCB Bank Reports Record Q2FY27 Profit Supported by Credit Growth and Asset Quality Improvement

DCB Bank has released its financial performance for the second quarter of fiscal year 2027, showcasing a record profit, improved operating leverage, and cleaner asset quality despite facing margin pressure driven by FCNR(B). Management has retained its growth guidance of 18 to 20 per cent for the period, alongside an expectation of net interest margin (NIM) improvement in the upcoming third and fourth quarters.

During the quarter, advances experienced a 21 per cent growth year-on-year, reaching ₹64,127 crore. Deposits similarly rose by 19 per cent to stand at ₹76,839 crore. Net interest income (NII) increased by 17 per cent to ₹699 crore, although NIM registered a decline of 10 basis points quarter-on-quarter to settle at 3.25 per cent.

Other income recorded a significant growth of 34 per cent, amounting to ₹249 crore, while pre-provision operating profit (PPOP) rose by 26 per cent to ₹383 crore. The bank's cost-to-income ratio improved to 59.64 per cent, marking an 18-quarter low. Profit after tax (PAT) rose by 29 per cent to ₹236 billion, marking the fifth consecutive quarter of record profit for the institution.

Asset quality metrics also showed improvement during the quarter. Gross non-performing assets (GNPA) and net non-performing assets (NNPA) declined to 2.29 per cent and 0.73 per cent respectively, both representing 23-quarter lows. Fresh slippages stood at ₹437 crore, translating to 2.94 per cent, with recoveries and upgrades covering 97 per cent of this amount. Non-gold slippages were recorded at 1.55 per cent, whereas gold slippages increased to 8.04 per cent. Provision coverage ratio (PCR), excluding technical write-offs, improved to 68.75 per cent, backed by ₹218 crore of floating provisions. The capital adequacy ratio (CAR) stood at 16.63 per cent.

In capital and liquidity management, the bank raised $194 million in August. Non-resident term deposits increased to 9.1 per cent of total deposits. High-cost bulk deposits were run down, which brought inter-bank term deposits down to 19 per cent. Current account savings account (CASA) deposits declined to 22.3 per cent, while the credit-deposit (CD) ratio improved to approximately 83.5 per cent as surplus liquidity was deployed.

Following these results, analysts have maintained a Buy rating on the stock with a target price of ₹233, valuing the stock at 0.93 times the estimated fiscal year 2028 book value per share of ₹250.

"DCB Bank's Q2FY27 performance highlights the importance of balancing steady credit growth with disciplined cost management. Achieving an 18-quarter low in the cost-to-income ratio alongside multi-quarter lows in GNPA and NNPA demonstrates sound operational execution. For expanding businesses and financial institutions, maintaining asset quality while actively deploying surplus liquidity remains key to sustaining profitability through margin pressures." — Dr. Shishir Gupta, Founder & CEO, StartupLanes