CRAR at 12.19 pc; NPAs decline considerably
By CL Jose
KOCHI/August 08-2022: The 15-quarter-long winning streak has taken a break for Dhanlaxmi Bank.
After reporting 15 back-to-back quarterly profits since the second quarter of 2018-19, Dhanlaxmi reported a net loss of Rs26.43 crore for the quarter ending June 30, 2022, against a net profit of Rs6.79 crore for the same period last year.
The immediate previous quarter ending March 31, 2022 also witnessed a net profit of Rs24.61crore. For the quarter ending June 30, 2022, the bank has incurred a loss of Rs5.02 crore at the operational level itself, even before provisions.
The last time the bank tasted loss was for the quarter ending June 30, 2018, exactly four years ago.
Needs capital badly
In the past one year, the capital adequacy ratio (CAR) or CRAR of the bank has fallen from 14.57 per cent to 12.19 per cent, a level that can’t support the bank to grow comfortably as the minimum required is 11.50 per cent. The bank has finalised plans for a rights issue that intends to raise up to Rs130 crore in capital.
businessbenchmark.news has recently reported that the bank has appointed Centrum Capital to run the rights issue for the bank.
High cost-to-income ratio
The management views the bank’s high cost as a fundamental worry, which needs to be addressed on a war-footing. The management is understood to have taken steps to address the high cost-to-income ratio in the operations of the bank.
The already bloated expenses have further increased to Rs241.84 crore during the quarter under discussion compared with Rs230.13 crore for the same quarter a year ago, and Rs239.96 crore in the previous quarter.
Provisions for the quarter were at Rs21.41 crore, which was 130 per cent higher than the provisions a year ago at Rs9.31 crore.
The bank that enjoys a relatively high provision coverage ratio (PCR) among its peers in Kerala, saw its NPAs decline substantially during the quarter.
While the gross NPA declined from Rs641.53 crore to Rs553.82 crore or from 9.27 per cent to 6.35 per cent, the net NPA fell from Rs300.86 crore to Rs226.03 crore or from 4.58 per cent to 2.69 per cent.
Treasury did the damage
The body blow came from the treasury operations that inflicted Rs28.99 crore loss to the bottom line.
Unlike in the previous quarter or the quarter a year ago, retail and corporate operations of the bank did well during the quarter under review contributing profit (net of provisions) to the extent of Rs18.77 crore and Rs5.20 crore respectively.
