DCB Bank (NSE:DCBBANK) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the DCB Bank Limited Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participants will remain in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. We have with us today Mr. Praveen Puthi, Managing Director and CEO Mr. Sreedhar Seshadri, Hold Time Director Mr. Ravi Kumar, Chief Financial Officer Chief Kumar Singh, Chief Investor Relations Officer. I will now hand the conference over to Mr. Praveen Kuti, Managing Director and CEO for opening remarks. Thank you. And over to you, sir.

0:52 Thank you, Ryan. Good evening, ladies and gentlemen. Very happy to announce the quarter one financial results. This quarter was replete with geopolitical uncertainties, rising inflation and supply chain disruptions. Our strategy in these times, as I had mentioned in my Q4 results call, was to stockpile customer liabilities, work on improving productivity, focus on portfolio quality, optimize capital utilization and finally, resulting in improving profitability. Let me take you through the key financial highlights.

1:39 Our total deposits have grown by 20.06% Y o Y and total advances by 17.06% Y o Y. Our NIM at 3.35% has increased by 15 bps over the last year, primarily on the back of lower cost of deposit and improving recoveries. Our growth in core fee income from INR 134 crore in Q1 of last year to INR 175 crore in this quarter, 31% growth, has helped us offset a onetime treasury income impact of INR 85 crores between these two quarters. On the cost front, we have hit a historic low of 2.42% cost to average asset for the quarter.

2:32 Remember, quarter one is when you have the salary increases. Traditionally, it's a higher cost quarter. And we knocked off 10 bps from the cost to average assets of Q1 of the last year, from 2.52, we have come down to 2.42. Even quarter on quarter, we have our cost to average assets has decreased from quarter four to quarter one. And if you were to dig into where the reduction of cost is coming from, you will see that our number of employees is currently at 11,554, which is lower than the eight ninety six people we had two years back in June 2024. So we have grown somewhere in 8.5% year on year for two continuous years.

3:23 And the number of absolute number of employees in the bank is actually lower. As a consequence of this, our business per employee is at an all time high of INR 11.06 crore. And if you were to look at the portfolio quality, it is consistently improving. And last year, I told you that we were at a seven year low from a yearly basis. Our GNPA currently is at 2.43%, which is 50 bps better Y o Y and two bps better Q o Q. Net NP, on the other hand, was at 0.84, 38 bps less than Y o Y and five bps less Q o Q.

4:17 The credit cost for the quarter is 26 bps. Our provision coverage ratio is a shade under 80% and our recovery and upgrade as a percentage of fresh slippage is 92%. We continue to make optimal use of our capital. Our Tier one capital, including profit for the period, has increased to 14.9% from 14.26% of Q4. Finally, the bottom line is for the quarter has grown 36% to INR $2.13 crores, which is the highest ever quarterly profit in the history of our bank.

5:04 In fact, in each of the last four quarters, in Q2 of last year, that is the highest ever, followed by Q3 of last year, which is the highest ever, followed by Q4 of last year, which is the highest ever, and so far, Q1 is the highest ever. So we signed off the quarter with the highest ever quarterly EPS of INR 6.62 and a book value of INR 198.12. Last but not least, our ROE for the quarter for the first quarter is 13.61%, which is a 2.05% improvement over Q1 of last year. What gives me some happiness is that the bank has shown the ability to give time bound guidance and show the consistency to meet it within the time frame.

5:59 The guidance on cost to average, below 2.5%, GNPA below 2.5%, NNPA below 1%, ROE greater than 13.5 have been met in Q4 and repeated in Q1. As you can see, we, as a bank, thrive on consistency, predictability and sustainability. With this, I thank you for your patient listening. And now operator, if you can open the floor for the comments, observations and clarifications. Thank you. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Questions.

7:07 We take the first question from the line of Akshat Agarwal from Nirmal Bank Institutional Equities. My first question is on margins. Yield on advances declined by 26 bps Q o Q. So sir, please, could you elaborate on the key drivers? And with the loan mix gradually moving towards business loans and we have the benefit of residual deposit repricing as well. So how do you see yields funding costs and overall NIMs evolving for the rest of the year? That was my first question, sir. Right. So yield came at 10.75%, which is primarily due to the product mix that we went for in Q1.

7:55 As you've seen, gold was a driver. The big moment has come from gold, which comes at a slightly lower yield and substantially lower cost and fairly minimal credit cost. We would see that as the year passes in Q2, Q3 and Q4, you will have higher yield mortgages contributing more. So over the next three quarters, the yield increase will come from a higher product mix of the mortgage sourcing that we do and secured non gold products that we would do. Right, sir. So if you could share the proportion of lap versus retail home loans, even on a flow basis and if possible on the stock basis?

8:47 Currently, we are at the seventy-thirty mark. So what used to be at 25% cut is now looking like 20 seven-twenty three on business loan and home loan. So that will continue. We are happy with the seventy-thirty kind of cut. Probably it will be steady state seventy-thirty unless there is something dramatic which happens, which makes us change the SKU again. So secondly, on the gold loan slippages, like if you could provide some color and how should we see this going forward? I mean, it's now set 7.3%, right? I know it's all secured, but still, I mean, if this will continue or is it going to come down by next quarter? If I remember right, it's 5.3, not 7.3%, unless you said 5.3%, right?

9:36 So on the total slippage of overall, you're seeing that the noncore slippage is considerably better. We are at 1.52%, which is very well within the norms. On gold, I would tend to see that slippage is not really indicated. You look at the last eight, nine quarter actual NPA stock of gold loans, it is fairly within the 20,000 to INR 30 crore mark, even though the book has increased significantly. So on a close to INR 7,000 or maybe INR 7,500 crore book, you're having an NPE of 30% and credit loss, which is even negligent, not even worth mentioning this call. Right.

10:23 So in terms of the growth trajectory going forward, so what's your outlook for the gold loan growth in light of the recent softening in the prices? And how do you see mortgage portfolio performing over the coming quarters with currently it's at 1% Q o Q on year on year 10% year on year? So on gold loan, we have taken a conservative view where even though RBI permits LTV up to 85%, we have been conservative, and we give a maximum of 75% LTV. So if you walk into a branch, 75% is the maximum LTV that you'll get. And despite being conservative and being less competitive than what other players in the market, you're still able to grow the book sufficiently.

11:13 And if you notice, gold had a INR 17,000 crore INR 70,000 per gram value in middle of the quarter. It has come down to 14,400. So if you were to look back and whenever the hindsight look at it, I think it's a good call. You're able to grow to your ambition and still not to have to do any margin call. It helps the business considerably. So I would tend to think that the gold as a percentage of overall percentage of our book would be somewhere in the 20% to 22% mark. On mortgages, traditionally, Q2, Q3 and Q4 are the ones where the dispersion significantly goes up. One way of looking at this is if you were to compare our disbursals of INR 1,500 crore with INR 1,100 crore, which we used to do in the same quarter one year back, that's a 35% increase in disposals.

12:18 And if you continue to increase the disposal by that kind of a number, you will see the benefit flowing into the balance sheet growth as well. Very well, sir. So my last question is on fee income. Is it was a decline primarily seasonal in nature with low disbursement in 1Q? We had INR 101 crore treasury income in quarter one of last year. This year, we got INR 16 crore. So we had to make up INR 85 crore of shortfall and we made the true core fee income, which is repeatable in nature. Yes. But it declined on a Q o Q basis. So that's just seasonal, right? Because 1Q is a seasonally... Third party distribution in Q4 is higher.

13:07 Also the processing fee from loans, which are higher in Q4 is the reason why it will be Q4 to Q1 will be less. But if you were to compare the Q4 to Q1 delta with the previous Q4 to Q1 delta, you'll find the data much more in our favor for this year. Thank you very much, sir. Thanks a lot for answering all my questions and all the best. Thank you. We take the next question from the line of Jason Sharma from Systematic Shares and Stocks Limited. Please go ahead. Thanks for the opportunity. Am I audible? Very well, Chetan. How are doing? Yes. All good, sir. Thank you. Sir, my first question is regarding the CASA ratio. So how do you expect the CASA ratio to evolve going forward? As we can see that in Q1 FY 'twenty six, it was around 23.32 and currently stands around 21.65%.

14:06 So what's the strategy to improve in the coming quarters? I want you to look at the cost of deposit of the bank when the cost of ratio was 22% in Q1 and the cost of deposit today, okay? So despite cost of decline, you're seeing that our cost of deposit, cost of funds actually has come down from 7.18% to 6.75%, okay? So in my mind, CASA, it is good to have CASA ratio going up. Specifically, our cost of is 5% only. I think that's a clear area for improvement. But cost of doesn't really reflect the truth as much as cost of fund does or as cost of deposit does.

14:55 So the way we look at it from management perspective is how do you bring the cost of deposit down, where one component, of course, is CASA. Correct, sir. Are you done with your questions? One more, sir. It is... It's just a request from the... My end that, during the preparation of the SEC report, I tried to get in touch with the concerned team, but the earliest appointment available was around forty five days later. If possible, could you please guide me to the appropriate point of contact whom I can reach out to for directly and quicker response for a better coordination?

15:42 Certainly. I will also tell you what the blackout periods are so that there is no surprise in that, right? The least we can do. Okay. Thank you. Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to two questions per participant and rejoin the question queue for follow-up questions. We take the next question from the line of M. B. Mahesh from Kotak Securities. Please go ahead. Good afternoon, sir. Questions. One is, last quarter, you indicated that the headroom to maintain margins was reasonably okay for '27. If you can just comment about this.

16:28 The second question is on while you indicated mortgages tends to be quite slow on disbursements in the first quarter, even the Y o Y numbers doesn't look particularly strong. Is it a choice on margins to defend the margins that this choice was taken? Or is there some actions on the ground that you're seeing, which is making you to grow slower? Anish. Sorry, didn't recognize your voice. Sorry, I'm outside. Yes. On mortgages, no, there's no intentionally we're not slowing down. Think it's not to improve the margins that we are the growth is not moving in. Consciously, we have decided about a year back that we're not going to do any further DA in mortgages.

17:15 So the DA book will always be run down. It will never be replenished because we don't see the reason for that. Currently, it's all organic sourcing, better yield, much better portfolio quality and considerably better ability to do cross sell. So that's the reason why we are seeing the momentum happening. And on growth, the real early indicator is the dispersal. So if you were to see the delta in dispersal, you're seeing a 35% increase in disbursal between Q1 of last year and Q1 of this year. So and if we continue the same momentum, by the end of the year, you will see a very, very different growth path on the balance sheet growth. We're not seeing any considerably higher closures, foreclosures or part payment coming in. So if we maintain the similar level of dispersal, probably mortgage will outpace the overall growth of the bank as well.

18:18 And on the first question, which is on margins, which had indicated last quarter that it will be stable for the year. How are you seeing it for this year now? On margins, if you see, it's a ninety day quarter four versus a ninety one day quarter one. So you will see a one day car impact coming through. Our product mix was such that we had a more gold loan in quarter one, probably that will not repeat itself in quarter two. So you will see the mortgage product increasing its presence. You will see more of agri, higher yield products having a higher amount of sourcing and impact on the portfolio. So we will probably see a upward curve in the interest yield curve.

19:07 But having said that, 14 bps is the reduction that we managed on cost of deposit between Q4 and Q1. I'd be very happy if we continue with the 14%. But realistically, I would expect something like a 7% to 8% decline. And if you hold the portfolio to the standards that we are keeping to right now, there's no reason why NIM will not increase in Q2 and also going forward. We take the next question from the line of Jaya Mudra from ICIC Securities. Congratulations on a good quarter.

19:52 Sir, used to have actually a bit of adverse seasonality in Q1, right, in terms of growth, in terms of slippages and margins also. If I see this quarter, the... I mean, it it is less visible in terms of, you know, the growth is flattish Q o Q, but interest on advances have grown up recently at 4%. Slippages while they are up Q o Q, but they are not dramatic change. Cost has also held up. Any changes that has happened in the business or that is something different which has happened? The usual seasonality is not there. So that is the observation of question.

20:38 So we've given a guidance with a clear timeline on multiple metrics of the bank, including cost, NPA numbers and ROE. We said it's not like in the next six to nine months. It is exactly in the year twenty six, twenty seven, thirteen point five. We also said in the year twenty seven, twenty eight, fourteen point five. So we are ensuring that we have calibrated growth and calibrate growth of the right quantity right quality. So you're seeing that efficiency improvements that we have implemented a year, one years point back is giving the kind of results that we want to get.

21:29 And possibly, this should continue. An ROE of 13.5% in this year should happen without a hockey stick kind of movement, right? Every year, every quarter, that kind of movement has happened. And the bank is geared up for that. So we don't give a guidance unless we are reasonably sure of it. That's why in September, we gave a guidance. We could see what is coming in. And over a period of time, that guidance will be taken with more and more credibility if you have the kind of performance that we have been having for the last four, five quarters. Otherwise, there is really no dramatic strategic change there. Sir, secondly, on your core lending book, right, so we understand there was change in the core lending regulation, etcetera.

22:23 So hopefully, that is done. And how to look at core lending portfolio growth going ahead this quarter? Of course, is a relatively weak, but how to think about as we go to FY 2027? Expect it to go to 15%. We have the guidance we have given is that core lending will not exceed 15%. So we have a room of about 2.52% more to go. So that availability, that is an opportunity which is there. We could go up all the way. But personally, I prefer organic lending improvement and co lending can be somewhere in the where we have got 12.5% to 15% kind of range, somewhere around somewhere in between this. Don't want it to go far below this, but definitely, we don't want to be kind of relying on co lending for our growth.

23:26 So organic will pick up. Co lending will not be at 12.5%. It will be somewhere around the 30% to 14% range. But we can we have the luxury to go all the way up to 15% as per our internal ceiling and benchmarks are concerned. And then on gold loan, I just wondered that the growth is very strong, 100%, almost 100% Y o Y, 35% Q2. And so just to understand the risk framework, how do you, let's say, price the loan because there could be a daily variation. Do you do some moving average? Do you do some minimum floor or maximum ceiling, etcetera? And, you know, how much percentage of the gold loan book could be, let's say, above 75% LTV?

24:17 Not at the blended level, but individual cases where or what is the risk management that you have for gold? Jay, you can test for yourself. RBA allows up to for consumption loans, up to 85% LTV, okay? For business loan, there is no upper cap. You can go 110% also or 120% also if you want to. There's a new rule applicable from January 1 or April 1, April 1 onwards. You can call up any of our branches or walk into any of our branches, and not one branch will be able to get more than 75% despite RBA allowing 85%, okay? And we are able to grow. So you don't necessarily have to go all the way to 85%. You're comfortable having a buffer there.

25:05 So and look, we're happy with the kind of growth we're getting at a maximum of 75%. Now that may change tomorrow if there is intensive competition action that can change. But as of now, we have taken this call. And the benefit of hindsight, I think, is a good call because when gold price was 17,000 per gram, had we given 85%, it would have become 100% LTV today because 85% of 17,000 is $14,400 which is the gold price of yesterday. So we'll be doing margin calling like crazy and spending a lot of management time. There will not be NPA, hopefully, but there will a lot of management time wasted on margin calling. So we remain conservative.

25:52 Having said that, for co lending, we go up to 85% as per the RBI norms apply. So what the originator source can be at 85%, but internally within the bank for organic sourcing, we don't go above 75. That is all right, sir. The question is, if hypothetically... I would request you to please join back the queue for follow-up questions. Sure. Thank you so much. Thank you. We take the next question from the line of Bharat Gupta from three sixty one Capital. Please go ahead. Yes. Hi, sir. Thanks a lot for the opportunity. Hi. For Sir, my first question is the disbursement, which we see within the MSME segment has been falling on a Y o Y basis for the last that's couple of quarters.

26:40 Right. So what actually is happening there? Or can you just highlight that? Yes. So on MSME, we are trying to there are three things we are working on, which we need to improve. And I think all the three are interrelated. One is current account. Two is MSME overdraft facilities. And three is trade finance. So as you can see, our current account growth has been 5% Y o Y. SME has been has de grown partly because we stopped doing threads, which is a very low yielding book. But fundamentally, getting the current account traction going and improving SME are the critical focus area for us. It will also help us in getting the trade fee income. The more that this was a number going up is critical for us. A lot of work is happening on it. We're not seeing the output on it yet. We are also not seeing the output of it yet.

27:46 But I'm sure that maybe in quarter two, definitely in quarter three, that number is increasing. We have put in higher quality people. We have opened up new sectors. So that it is a change that is bound to show itself an output in Q2, definitely Q3. Sure, sir. Sure. And my second question is if so first, how much of the deposit repricing is left or, you know, we start all the costs and have largely bottomed out? And just squeeze in one more quickly, what how much room is there within the OpEx to asset ratio to bring it further down from 2.4%?

28:35 Of course, we have done a commendable job over the last six to eight quarters. But if I look at the next four to five quarters, then what is the headroom? Yes. See, I'm keeping to the mandate of management has the guidance of 2.5%. We should come below that. So and obviously, denominator increasing at similar kind of levels will help bring the cost down. Traditionally, Q1 is where you take the hit of salary increase, etcetera, with the denominator coming in later. So there's a good chance that we will maintain or slightly improve the cost to average assets going forward.

29:22 And your first question on deposit repricing. Yes, Q2 also has a bit of it. So there is some of the old repricing still continues. One of the good benefits of having a long duration term deposit is that you continue getting the benefit for a longer period of time. Sure, sir. Thanks a lot, sir. You're welcome. Thank you. We take the next question from the line of Puneet Balani from Daulat Capital. Please go ahead. Yes. Hi, sir. Thanks for taking my question. So just two, firstly, on the SME. I know you gave the explanation earlier, but third the thing, are we building that up? I thought we already had a decent infrastructure in place for that, and is that the main reason for the rundown of the book?

30:12 And secondly, even in the CV, I know CV is not a big proportion, but there also we have seen some rundown. Is it... Is that done to maintain asset quality? Or is there any other reason as such, which I'm not aware of? Puneet, sir, on the margin bit. Yes. Sorry, I'll answer the first one. Puneet, CV book is a we don't have a TV team at all. It's a rundown. We incrementally source anything. It's just a pure play run down book. $304,100 crores will be there. How much is it? INR 3 crores. $3.50 crores, yes. So it is as long as it doesn't create a problem for us from NPA, there is no attention going into building the book. We have no intention also to keep building the book. With the historical legacy, which we are just ensuring that we run it down without any incremental loss.

31:00 On the MSME, my response remains the same. It's an area where we want to grow. We have not really gotten to the level of where we want to get it to yet. And that's where the opportunity lies for us. We certainly think that once we get the execution right on will be pretty well incurring the cost, not getting the benefit. But Q3, I can clearly see we will be getting the benefit of the incremental investments we've done, both on people and technology, opened up new sectors. So yes, right now, grinning and bearing it, we'll see maybe even Q2, you'll see an improvement happening on that on the MSME, I told part of 361. Got it. Sir, on the margin front, like we have seen your margins driven by the cost of fund decline, we are seeing margins remaining stable. On the yield a bit, assuming is it fair to assume that once we see the SME book picking up or any other segment which you could highlight, we will see some upliftment on the yield because this deposit repricing, I guess, a couple of quarters more, right? Or we have any more leeway? And how much if you could quantify how much bps we have left for deposit repricing? Just trying to ascertain what the trajectory will be going forward. Look, look, you're getting it wrong.

32:19 Deposit repricing is a natural phenomenon. There's a lot of effort going into the bank to get deposits at lower rate, fresh deposit getting a lower rate. We are not relying only on deposit repricing happening automatically. Our front line the rates that we currently give are such that you get a we were at one point in time, one of the highest deposit paying banks in the country. Today, that's changing. It is not just automatic rollover renewal of old high cost deposits, which is coming through. There's a lot of effort in branch banking to get a lower cost fresh customer into the system as well. So that's the first point. The second is, without changing anything else, the sourcing profile when it changes, like similar kind of when you see the dispersal of mortgages going up, and that's bound to happen in Q2, you will find that the kind of yield that you get on mortgage is far higher than the kind of yield you get on organic loans.

33:32 So it will definitely add to the improvement of the yield. If you keep the portfolio quality at similar levels or improve it slightly, you continue to get a NIM benefit going on it. As a bank, it will be the NIM improvement will be primarily driven by cost of fund reduction and maintaining good quality portfolio. I don't see us wandering into higher yield segment chasing NIM and then potentially suffering the consequence of that one year down the line or one point five year down the line. So clearly, the strategy is bring down the cost deposit, bring keep the portfolio quality momentum going.

34:21 And that would be the way the NIM improvement happened by changing the product mix. So more of lap, more of mortgages by itself. And SME, frankly, is INR 1,800 crore book. It cannot alter the SME of the bank. But at INR 29,000 crore mortgage book, certainly can. Got it, sir. Got it, sir. Thank you so much, sir, for answering. Thank you. We take the next question from the line of Aditya from Securities Investment Management. Please go ahead. Yes. Hi, sir. Thanks for the opportunity, and congrats on another set of results. Thank you very much. Sir, sir, first, one clarification on cost of deposits.

35:09 So Q2, you see a drop considering the repricing, which is left. But going forward from q two onwards, do you see that remaining stable or it should increase considering... If I look at your last two, three months, you have increased our fee deposit fees by 25 to 30 bps. And with tighter liquidity in the system, do you think deposits would increase from Q2 onwards? Aditya, good question. I want to tell you this. In Q4, we grew 21% liabilities, okay, in Q4. And in Q1, we've grown 20%. So we were very clear that even if it means that you have a higher carrying cost, it is important to get money now than money later.

36:00 And I'll tell you a five trend lines. Our cost of deposit over the last five quarters was 7.12, six ninety six, six eighty six, six eighty four, six seventy one. And these are times, like six eighty four was done in a time in Q4 when most banks are scrambling for deposit. In Q1, most banks are scrambling for deposit. We still got 20% growth, and we brought down 14 bps on the cost of deposit. So the best way to answer the question is by doing it and by doing it consistently. And that's what you're seeing. If you can grow by 20%, if you can bring 14 bps down on the deposit cost and keep your top 20 well within the 7% mark which you get processed without ruining the profile.

36:52 And you do it repeatedly quarter after quarter, especially quarter four, which is traditionally a very difficult quarter. You would have seen how the various competitive banks have performed on deposits. If you can keep it going, and there is merit in us squeezing the cost of deposit even further going forward. And it's not just from repricing or deposit alone. That helps. But that's not the only it's only a every passing quarter, the importance of that is being less and less and less. Understood, sir. And also, I... If I look at the CD ratio, it has come down, you know, because now around 80 to 81%. So is there room for that to increase going forward?

37:38 Yeah. At eight... We're at 80.49 right now. So you'll see asset there is a possibility that asset growth could outpace liability growth and going forward. And we're comfortable with that because you're sitting on stockpiled money. Got it. So just two small questions. Yeah. Do we see any benefit from the FC and R team launched by RBI? And secondly, any impact of ECL on us? Yes. FCLR, we are very keen on it because their individual deposit, long term deposit. And maybe they are slightly better than cost neutral.

38:24 So to that degree, it's not a bad thing. So we are focused on it. As far as ECL is concerned, there are two things I want to tell you. You've seen how the GNPA and NPA movement is. You've seen a credit cost of 26 basis points. And you've seen that the trend line of how all the three have been going for the last seven, eight quarters. And for ECL, clearly, if the recency matters, the fact that we are secured heavy matters and also the fact that every quarter, we are adding INR 6 crores to INR 7 crores to a floating provision, which is now INR $2.10 crores from which we are not even dipped into it even during COVID or demonetization or whatever else, never in the lifetime. That gives enough buffer for us when ECL goes live in April.

39:23 Got it. Got it. Sure, sir. I'm done with my question. So thank you. Thank you, Aritya. Thank you. We take the next question from the line of Krishnan ASV from HDFC Securities. Please go ahead. Yes. Hi, good evening, and thanks for taking my questions. How are you? Fine, sir. Thank you. A couple of questions. Your asset quality that you just mentioned, your GSP has been trending lower, your NMP has been trending lower. And this is five quarters, this is about a year since the tariffs were introduced by The U. S. So does that surprise you that why are MSMEs still resilient?

40:10 And it's not just you. Mean, there's something that we see across the banking system now. And just wanted your thoughts because you have been an MSME dominated bank predominantly. Just wanted to understand your thoughts on what's keeping the MSME engine running? That's one. And the second, I'll probably come to once you have answered this. See, primarily the MSMEs that we look at is from the service and not from manufacturing. Okay. And as far as services are concerned, we clearly do not seeing any impact of tariff or inflation so far. I was more concerned about inflation.

41:03 I had expected that the bounce rates or the slippages would increase because the total price were to increase by INR 15 over a two month period, it has to result in squeezing of the wallet somewhere. But one of the things I can tell you is that we have moved up the ticket size. So we did some mortgage DA in 2024, and that really bit us badly. The small ticket secured lending DA that we did with from some originators. And that has not kept us in good stead. So at that time, we decided we'll not only will we not do any DA on small ticket, but increase the average ticket size significantly.

41:54 So partly, I would say that it's because you've gone to a slightly more resilient customer. But even if you were to when I speak to other CEOs of other companies and or credit bureaus, there is no indication of any big problem coming in the kind of segments that we deal with. And what seems to be answering the inflation? Because even in services, including banks and financial services, I think the general cost of doing business is now higher than what it was six months. So what is it that's keeping inflation at an edge now? I just hope it's not the loan supply.

42:48 There is supply. There is no restriction of credit, right? So I just hope it's not just the supply of credit. But otherwise, you're seeing when you're going to go for customer visits, etcetera, I'm finding increasing sanitization everywhere. Both the height of the cup and the diameter of the cup is reducing for every cup of chai that you're having, whether in rural India or suburb in India, just to give you an example. So there is some bit of pressure, but that's not really reflecting in the financial system. And frankly, loan demand is significantly we have an option to pick and choose. You can pick and choose the right kind of customers. There's demand across and you're able to command your ability to choose. So that's why it's not reflecting anywhere. But I generally believe that petroleum price increase will have a ripple effect on multiple other costs.

43:51 Got it. So my second question is about your NIMs. You mentioned NIMs still has some legroom or should I say the cost of deposits has some legroom on the way down. Is this despite the hike in incremental cost of funds? Because what you expected six months back is a very different environment now, right? So so do you see... And and the RBI is quite stubborn with rates. So they are they are not they are not leading more rates. So there's no EDLR benefit coming through for banks yet. Right? So how are you so confident about NIMs going up in the quarter? See, I think the answer lies in inefficiency.

44:41 As a bank, I think we have been giving a higher rate than what is required for the kind of growth that we had for a decade. So we were putting more money in the market than what is required, and that's the honest answer. One way of looking at this, if you were there in the Investor Day presentation, I spoke about it. The difference between our rate and the rate of that delta is decreasing and that is good enough for bringing down the cost of funds and cost of deposits. But that is not even after the reduction, there is enough for the greedy customer to come to us because 45 bps over what some other bank gives is also good money.

45:26 You wouldn't have to give 65 bps. Definitely do 120 basis more than what the biggest banks are giving. So the moment from 120 to 70 is helping us in the cost of funds and cost positive cost of funds. And any reduction thereon is still enough in the in our pricing to attract good customers. So in a sense, I'm kind of shooting my toe in the foot when I'm saying this, there is that opportunity. There is an efficiency improvement that we can do. And the whole team of the bank for the last three years, I've been a MDCO, has been about improving efficiency in terms of productivity, in terms of cost of funds, in terms of capital utilization, in terms of output per person.

46:15 So I really think we're a very generous company earlier. Now we are being a bit more leaner, meaner, fitter, and that's reflecting in the kind of bottom line that you guys are seeing for the last four, five, six quarters. We take the next question from the line of Param Subramanya from Investec. Please go ahead. Good evening. Thanks for taking my question and congrats on the quarter. Hi, Param. Thank you very much. Yes. Hi, sir. So first question is on the cost to asset.

47:01 So you are at 2.4%. You are already doing better than the medium term target that you set for yourself. So can we assume we are very much or near the bottom here? Or are there more efficiency gains that we can see? That's the We first in the last quarter, I said that I would expect the number of people increasing from INR 10,500 to somewhere around INR 13,000. I still hold on to it. We probably will be increasing people because for all the top one digital, we still require feet on street in increasing the sales volume. So some bit of the efficiency improvement will get consumed by the incremental staff salary.

47:51 But I would tend to think that we would be under the 2.5 guidance that we have given. We'll try and keep it within the two forty five hundred mark for the full year. Great, sir. Perfect. Very clear. Secondly, sir, some of the midsized banks have called out sort of a lending rate sort of pressure on the gold loans. So if I can understand what is the, say, broad gains on your gold loan portfolio? And is there a pressure pricing pressure you're seeing there, say, led by public sector banks that could hurt your margin? When I ask the front line the sales folks, they will always say there's humongous pressure. They know not a single salesperson will ever say there's no pressure. But the fact of the matter is, and you can check it out, like I told Jai Mudra earlier, you call up a branch, you check you walk into a branch, you will not get more than 75% LTV, whereas the bank next door or the gold loan company next door will give you 85%.

48:52 And 10% is a lot of money. So if you're able to grow the way we are able to grow without giving 85% LTV, right, and keeping LTV down by 10 percentage points, why would you face a pressure? There is enough in the market. Maybe we haven't seen that pressure coming in, either pricing pressure coming in or the market pressure coming in. But if we do, then we'll probably revisit how we do the go on business. But if you see Q4 and Q1, both, we haven't seen too much of pricing pressure or LTV exposure pressure coming into us. From an organic perspective, I am not talking about coal lending at all.

49:43 I'm talking about our own book. Fair enough. Sir, if you're comfortable sharing, what is the broad portfolio yield on your own books? We don't give product wise, do we? No worries. We don't give. Okay. Thank you so much and congrats once again on the quarter. Thanks, Param. Thank you very much. Thank you. We take the next question from the line of Vaibhav Mehta from Axis Mutual Fund. Please go ahead. Hi, sir. Thanks for taking my question. Hey, Vaibhav. How are you? Yes, I'm fine. So my question was regarding with the branch additions and branch growth vision that we... We're having. I've seen that we have we have seen good number of additions over past few quarters, though, you know, flattish.

50:29 But going forward, what would be our vision for that? And what would be the markets we would like to penetrate going forward? Maybe another 20 branches this year. So we're not very branch focused for our growth. So maybe 500,000,000 be a good number to have at the end of the year, maybe slightly more than that. But that's not at least for the next two to three years, I don't see branch being central to our growth story. Where will the 20 branches come in? Mostly second, third branch in the existing cities, which are doing well. So increased penetration in existing neighborhoods would be the way to go.

51:17 But otherwise, it will be more of people increase than the branches and proportionally more of the people increase than branches increasing. Got it. You're welcome. Thank you. We take the next question from the line of Baibhav Garg from VPPL. Please go ahead. Hi, sir. Hi, Baibhav. How are you doing? I'm good. Looking a bit ahead, your tenure is still April 2027. So has the bank board indicated anything about an extension?

52:03 And if the board decides to offer an extension, what would be your willingness to accept it? And secondly, any update regarding the fund raising plan of the banks for the current financial year? Yes. So has a branch spoken to me? No. Sorry, has a Board spoken to me? No. I think it's a bit too early. What my personal choices are, I mean, I've been with this bank for nineteen years. I can work for another nineteen years in the same bank. I have the energy, willingness and I've got a great team which you're working with. So no two ways about it. But again, it's a Board's call, RGS call. So that's a simple answer to my question. And with regard to fundraise, so it's weird, right?

52:53 14.26% at Tier one capital three months back. Now that we've gone to 14.9%, right? And if you were to look at one year back, Y o Y, our capital adequacy has gone up from fourteen twenty to fourteen ninety, right? And overall, if you were to look at Tier two included, crore has gone from $16.66 to $170.03. So that's very weird because it's like you all of you know, banking is an industry which is very, very capital. So we are in a good space controlling RWA. But the reason why you want to have capital is not to conserve capital, it's to expand on it. I the model is more or less proved, right, that we can run a secured book of where 13.5% definitely and next year, will see 14.5%.

53:55 That model comes into place and we demonstrate that, look, it is very much possible to run a 13.5% to 14.5% kind of ROE book. Keeping it secured, the kind of small ticket secured granular assets that we have. So then the whole idea is how do you get incremental capital for the next phase of growth, maybe what is good enough for the next three years. Last time we raised capital was eight years back, maybe nine years, eight years back. So for the next three years, what is required, we'll take it up. So there's no urgency, but we are open. We're having conversations.

54:42 So we had an AGM where an enabling resolution was passed for INR 2,000 crore, the INR 1,400 crore of Tier one and a total of INR 2,000 crore capital raise that has gone through pretty smoothly. There are there is definitely obviously, with the kind of consistency that we are bringing in, there is interest. But the timing quantum and pricing will be decided by the Board. Thanks a lot, sir. Thank you. We take the next question from the line of Devam Modi from Ardeco. Please go ahead. Yeah. Thank you, sir, for the opportunity. Hi. Hi, Devam. How are Yeah.

55:28 Hello, sir. Hi. Hi. So firstly, on the noninterest front. Given that our our sort of fee income is partly liability linked, and we have seen a very strong deposit growth, plus there is a potential of higher advances growth during the year given the disbursement run rate and the existing CD ratio. One should could one expect the current outperformance of core fee income in the first quarter to only extend and grow in the remaining part of the year? And also any branch level intervention or initiative we have taken to enable this as of now? Look, core fee income by definition, core fee income is something which is replicable and recurring in HR, okay? So I'll tell you what is working well for us, what can work better for us, what can improve.

56:18 So mostly, our fee income is driven by core fee income is driven by third party distributions and processing fees. Q1 usually is lukewarm in terms of asset dispersal. We expect that to continue not to continue, to improve in Q2, Q3 going forward. So processing fee naturally, if it's just by extension of logic, should go up. Third party distribution, Q4 usually is a great quarter and Q1 is a very sleepy quarter. We managed to kind of change that, okay? That's a big mover because usually, four months' worth of output happens in Q4 and two months' worth of output happens in Q1.

57:06 We managed to kind of catch change that Q1 behavior. So that also, logically speaking, we should see improvement happening in Q2 and Q3 because that's a natural flow of things. Where the area where we need to improve a bit more is trade finance income. It is tied to how well we do current account in SME. And if you heard me speak to the earlier folks, either you can call it inefficiency or you can call it an opportunity. Getting the current account SME right will, by force of nature improve our trade finance. And that is a recurring income, that's core fee income. That, think, is a real big opportunity.

57:55 The other two, I think we are doing fairly well and we'll continue to do fairly well. So trade finance, how well we build it up, which will also partly address our current account issue and partly address our SME momentum is one area where we are focusing. We're putting a lot of effort, not seeing great results, but we're patient about it. Things don't happen overnight in retail banking. So putting the effort, so you saw now you reap maybe after three, four either years or quarters. Sir, in any branch level initiative or intervention that you have taken that seems to be working well on this front? A huge number. I mean, there's like two... There's nothing on a branch. I mean, there are four eighty branches, And each branch is different. I mean, so it is not a one measure, one size fit all.

58:48 Some just go gangbusters on gold loan. Some are fully term deposit oriented. Some are practically current account. It's very, very it really depends upon what kind of market it is, what kind of competition is there. So the sum total of that is what you see as the output coming in either in the balance sheet or in the fee growth or even in the asset growth. So it's horses for different causes. And finally, sir, we do recognize that you have I mean, you have done a very disbursement in this quarter. But at the same point of time, there seems to have been a high rundown as well. So any thoughts on that front end, whether that was on the balance transfer side? And what would be the general churn in the mortgage book and the overall tenure of the same?

59:39 Okay. In the mortgage book, there are two things that we'll look at. One is that, like I told you, we did some round calls in 'twenty four and got some DAs which contributed to NPAs, it still does. So we stopped that completely. So if you see the mortgage book today, it's practically fully organic, right? And secondly, the disposal of today will lead to the growth of tomorrow. So if you have a 35% increase in reversal, it is unlikely that you will see a 35% increase in growth. But if you continually do a 30%, 35% increase in dispersal over the Q1 of last year, Q2 of last year, Q3 of last year and Q4 of last year, then you will see that the growth will not be 9% as you see currently seeing. It will be upwards of 20% to 23%.

1:00:28 If you ask me how are we on the premature closures, the noncontractual closures, Q1 and Q4 are I mean, Q1 is slightly better than Q4. So I almost said that are equal. Q4 was more aggressive. There was far more of takeovers. Q1, there has been lesser takeover. So on the mortgage book, I'm happy to see that the lead indicator of growth coming in, which is this person. And if we continue on the same path, there cannot be two ways about growth not coming through. Because we have a good a very good retention management system, pretty highly tech driven.

1:01:14 AI plays a big role in identifying the goods and the bads, probability of defaults. So I think it's reasonably well managed. And I don't lose sleep over mortgage growth. Ladies and gentlemen, we take the last question from the line of Kushwant from K Pak. Am I audible? Kushwant, how are you doing? Very well, sir. A small question. Congratulations, first of all, on decent set of numbers. I remember, also in previous quarter for most of the banks, common question that was coming was the impact of crude oil prices and war and any stress coming into the banking system in the later part of the year. Just wanted to pick your thoughts on that.

1:02:06 So I believe that then, and I believe that now also. But honestly, I don't see an impact of that hitting us. And it is because of these fears that we significantly increased our liquidity. We increased our deposit growth significantly. That is the reason why we kept our LTV very conservative and went after gold loans in Q1. But honestly, look at the slippage ratios, non gold slippage ratios, the bounce ratio, which we don't publish otherwise, but these are the early indicators, our 12 MOB, twelve months on board, 30 plus, 90 plus. There is no indication to believe that there is going to be a problem in terms of repayment based on historical facts.

1:03:01 So that's what we did. So we just stockpile liabilities and turned our sourcing engine towards safer assets. But frankly, that clearly, Q2, Q3, we are the mortgage business, mortgage sourcing will significantly increase, has already increased in July, similar with SME and MSME. So all other asset products also started kind of rolling it in. That's our indicators. And if you look at external indicators of credit bureau also, one doesn't see any impact of that in this particular target market. And by saying that, I mean, a ticket size of X and above in locations that we are currently present in. We just don't see any negative impact. Ladies and gentlemen, with that, we conclude the question and answer session.

1:03:57 I now hand the conference over to Mr. Praveen Kuti for his closing comments. Thank you very much. So we hope to keep getting the same kind of questions and same set of answers and the same set of results. And the whole idea is to bring in the consistency of performance, not just of growth alone, but also of all the engines of growth. We focused on it. What we didn't speak about in this particular meeting is the kind of investments that we are continuing to make in technology, the incremental use in AI, etcetera. But hopefully, we will come back to you next quarter with the results of quarter two.

1:04:48 And you will see how well our talk of being consistent, being predictable and being sustainable is there's nothing to prove as much as results can prove. So keep watching of our results. Thank you very much. Thank you. On behalf of DCB Bank Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.