Branch network expansion also on cards
THRISSUR: Now that Dhanlaxmi Bank, the smallest among the more than 9-decade-old Kerala’s banking foursome, has come out of the clutches of prompt corrective action (PCA), a period of muted action prescribed by the regulator for failing to generate the required profitability until recently.
The performance during the last two quarters that turned in positive return on assets (RoA) has been instrumental in the bank exiting PCA more than two weeks ago, being the country’s only private sector bank to have fallen to PCA framework.
The bank as if in a mood to make good for its lost time, is set to fire on all cylinders in order to grow its topline – be it the branch network, capital base or the business volumes.
Talking to businessbenchmark.news, the MD & CEO of the bank, T Latha (seen in the picture), said Dhanlaxmi is planning to double its share capital through fresh issue of Rs250 crore equity shares in the near future itself.
This if goes ahead as contemplated will take the share capital of the bank to more than Rs500 crore from the current Rs253 crore.
However, Latha warned that these are initial thoughts and not decisions per se. “First we need to take approval from the board as well as the shareholders, and this can be done at the next shareholders’ meeting after the annual results. These are only plans and we need to go through several processes before a final decision could be arrived at on this,” she added.
In the journey forward to build up the asset base, which is at Rs11,906 crore as of now, the bank will go out to build up a portfolio of quality credit. The bank is well positioned to expand its credit base as its credit deposit ratio (CD ratio) currently stays at about 53 per cent only.
Latha said while the total business volume in Kerala will certainly have an edge over the rest of the state, the bank will focus on other states too, especially the cities such as Delhi and Mumbai to grow the corporate business. “Though we will be keen to lend to SMEs and even corporates in Kerala, the mainstay of the business here may continue to be retail,” the bank CEO pointed out.
All said and done, the NPA continues to be the underbelly for the bank as it shoulders a gross NPA of more than 8 per cent of the loans. But Latha is hopeful that this will soon be brought down to about 6 per cent.
“But we are particular that we will not write off any bad loans, and moreover we will not sell any bad loans to ARCs,” she said while reminding that the provision coverage ratio of the bank is very healthy at about 82 per cent.
The bank has constituted a team to monitor the bad loan graph and to backstop any further slippages. The team will also follow up the existing bad loans and sensitise the borrowers towards settling their dues.
The new steps taken by the bank has started reflecting in the market too. The share price, which used to hover around Rs14 a few weeks back, has gone up to the whereabouts of Rs18 taking the market capitalization up to Rs454 crore (as of Monday).
Dhanlaxmi has posted a net profit of Rs16.90 crore for the third quarter ending December 31, 2018, thus enjoying the comfort of reporting profit for two consecutive quarters after a long gap, the previous quarter having witnessed Rs12.15 crore net profit.