Development Credit Bank: Rise in interest income brings in turnaround Q1 performance

MUMBAI: Shares of Development Credit Bank have fallen 2.55% to Rs 40 on the Bombay Stock Exchange Friday, underperforming the broader market. At the current market price, the stock trades at a price to book value multiple of 1.26 times. It has a market capitalization which is 0.11 times it is total assets. And given the turnaround performance, the stock looks attractive.

During the June 2012 ended quarter net profit more than doubled from Rs 8.83 crore in June 2011 quarter to Rs 18.91 crore. The growth came on the back of a 23% rise in net interest income as well as lower provisioning. Net interest income is the difference between interest earned and interest spent.

Over the past four quarters the bank has been lowering provisions - a sign that it is managing its loan book better. The improvement in its asset quality has also been reflected in the decline in the percentage of non performing assets to total advances (net) from 1.19% in the June 2011 quarter to 0.75% in June 2012.

The bank has also improved its net interest margin from 3.10% in June 2011 to 3.18%currently. Net interest margin is the difference between yield on advances and cost of deposits.

It has also become more cost efficient in its operations as seen in the fall in its cost to income ratio from 78.07% in June 2011 to 72.85%currently.