Dhanlaxmi’s ‘loans ratio’ lowest among Kerala banks

Bank plans to raise Rs150 crore subordinated debt

KOCHI: The stubborn advances that refuse to grow continue as the underbelly of Dhanlaxmi Bank, which has improved on several parameters during the last financial year that ended on March 31, 2018.

The bank that has posted a loss of Rs24.87 crore for the year, has placed big amounts in investments, which according to experts, could be due to lack of right avenues to lend.

The bank’s credit-deposit (CD) ratio has fallen from 57.35 per cent to 55.95 per cent during the year under review even as all other Kerala-based banks were able to improve themselves on that front.

Dhanlaxmi Bank is planning to raise Rs150 crore by way of Tier 2 debt securities through private placement in order to strengthen its fund base in anticipation to a growth in the bank’s business going forward.

While Federal Bank, the largest among the four, could improve its CD ratio from 75.09 per cent during 2016-17 to as high as 82.11 per cent last year, that of South Indian Bank (SIB) rose from 70.85 per cent to 76.51 per cent, whereas that of Catholic Syrian Bank (CSB) improved by almost a 9 percentage point to 63.56 per cent when the year closed in March 2018.

The proposal to raise Rs150 crore will be presented to the shareholders for their ratification at the upcoming annual general meeting (AGM). The bank, which has been in bad shape for some time now, has got a new head a few months ago.

Last year too, Dhanlaxmi had boosted its capital base by Rs270 crore. During the year ended March 31, 2018, the bank raised Rs120 crore through the allotment of 4.32 crore equity shares at Rs27.80 that includes a share premium of Rs17.80 per share.

Another Rs150 crore was raised through private placement of Tier 2 subordinated bonds (debentures) during the period. With the capital boosting exercises, Dhanlaxmi has been able to improve its capital adequacy ratio (CRAR) from 10.26 per cent to 13.87 per cent.

Though the bank has succeeded in improving several performance parameters during the past year, including the generation of a record high operating profit of Rs146.18 crore,  the gross non-performing assets (NPA) surged from 4.78 per cent to 7.35 per cent despite a spike in provisions from Rs76.42 crore to Rs127.29 crore during the year under review.

While the bank sits on an asset base of Rs12,286 crore, the total advance is to the tune of only Rs6110.49 crore whereas the investments are to the tune of Rs4364.60 crore with the Government securities alone constituting Rs3128 crore.

There are many bright spots in bank’s performance during 2017-18. The bank could reduce its total expenses by 14.06 per cent – from Rs1106 crore to Rs969.61 crore; the interest expenditure was reduced by 13.47 per cent from Rs757.45 crore to Rs667.52 crore.

The cost of deposits for the bank dropped by 64 basis points (bps), from 6.48 per cent to 5.84 per cent, which has helped in bringing down the cost-to-income ratio substantially from 78.75 per cent to 67.39 per cent during the said period. Dhanlaxmi maintains one of the highest provision coverage ratios (PCR) in the industry, at 80.02 per cent.



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