Dhanlaxmi Bank’s jittery financials are a concern
Moneylife Digital Team 09 November 2010

The sustained decline in profitability of the bank, coupled with the additional impact of further provisioning on its books is of grave concern for shareholders

Kerala-based Dhanlaxmi Bank is treading on choppy terrain these days, if its financials are anything to go by. The lender's bottom-line has been taking a hit for the past five quarters now, and faces some more heat given that it has yet to meet the mandatory provisioning requirement against its loan book.

The recent September quarter results have failed to provide much cheer to investors. Despite a healthy growth in the top-line, the bank's profits have been impacted due to staffing and branch expansions. The bank registered a 52% growth in revenues as advances have picked up considerably in this quarter. However, its net profit tanked a massive 74% to Rs1.62 crore from Rs6.26 crore in the corresponding quarter last year. Operating profit growth was muted at 9%, although entering positive territory after a long time.

Its performance over the past five quarters indicates that the bank finds itself in a sticky situation. Although average growth in revenues is fairly sound at 36%, the company's operating performance has averaged -39% over the past five quarters. On an average, net profits have declined 62% over this period.

The bank's net interest margin (NIM) has remained at around 2.4% over the past five quarters, which is much lower compared to some of its peers in the banking industry. On the asset performance side, the bank has gross non-performing assets (NPAs) at around 1.25% of its loan book while net NPAs stand at around 0.7%. However, the bank's loan-loss provisioning coverage at the end of September stood at only 46%. This is a long way from the mandatory provisioning requirement of 70% fixed by the Reserve Bank of India (RBI). This means that the bank will have to endure more stress on its profitability as it makes more provisioning in the coming quarters to address this deficit.

Recently, the bank announced the acquisition of 15% stake in financial services provider Destimoney Securities. This acquisition cost the bank around Rs13 crore. Destimoney Securities is a 100% subsidiary of Destimoney Enterprises, a financial services provider and advisory company owned and controlled by private equity firm New Silk Route.

According to bank officials, the primary reason behind this investment was to offer its retail customers access to online broking services through the bank. Although it could help the bank generate more current account, savings account (CASA) deposits, the investment is a costly affair at a time when the bank is experiencing more than just a pinch on its financial statement.

Comments
TARUNDAS
1 decade ago
Yesterday a press meet was held at the 'trichur press club' in trichur where the so-called corporate office of the'dhan ' bank is situated .The media persons of the club were addressed by Mr.k.Ananthkumar,Vice President & a few other office bearers of the ''All India Bank Officers' Confederation'to inform about the precarious position of the bank.As one who attended these are the main allegations:
1) Though the financials of the bank are weak -the dividend for the investors has IMPROVED FROM 10 % TO 5 % ! --the new management makes investments to simply divert media attention while announcing POOR financial results - 15% stake in financial services provider Destimoney Securities.
2) The q2 results do not reflect the correct state of affairs of the bank as this little profit of Rs 1.62 crore has been made out of a total debit of Rs 8 crre from ALL SB ACCOUNTS UNDER THE HEAD "CHARGES" which is ultra vires.Hence this debit is reversed if a complaint is raised by a discerning customer .
HAD FULL PROVISION OF 70% MADE AS DIRECTED BY RBI , THE LOSS WOULD HAVE BEEN IN 3 DIGITS AS THE SHORTAGE IS 24 % !!!
3)Even when the financials are weak,they have taken 20000 sq ft ofspace on a prime location from where the top executives of this smallest bank in india with the lowest profitability though the corporate office is in Trichur (where the H.O. of 2 other bigger banks function ) .Further,to fool the public of Trichur they have started to construct a new corporate building( though a bigger bank with excellent profitability has only a 30000 sq ft H.O. !)Of ONE LAC SQ FT building !
4)Mr.Amitab ,the Md&ceo has , out of the total 39.50 lac ESOPS, 36.50 LAC SHARES OF WHICH 10.50 LAC SHARES TAKEN BY HIM ,26.0 LAC SHARES DISTRIBUTED AMONG HIS COHORTS WHO JOINED THE BANK SINCE 2008 ! THE LOYAL OFFICERS OF THE BANK TOGETHER GOT 3 LAC !!!!!
TARUN DAS
1 decade ago
Yesterday a press meet was held at the 'trichur press club' in trichur where the so-called corporate office of the'dhan ' bank is situated .The media persons of the club were addressed by Mr.k.Ananthkumar,Vice President & a few other office bearers of the ''All India Bank Officers' Confederation'to inform about the precarious position of the bank and also the agitation they are sarting from 15/11/10 against the mismanagement .As one who attended ,these are the main allegations:
1) Though the financials of the bank are weak -the dividend for the investors has IMPROVED FROM 10 % TO 5 % ! --the new management makes investments to simply divert media attention while announcing POOR financial results - 15% stake in financial services provider Destimoney Securities.
2) The q2 results do not reflect the correct state of affairs of the bank as this little profit of Rs 1.62 crore has been made out of a total debit of Rs 8 crre from ALL SB ACCOUNTS UNDER THE HEAD "CHARGES" which is ultra vires.Hence this debit is reversed if a complaint is raised by a discerning customer .
3)Even when the financials are weak,they have taken 20000 sq ft ofspace on a prime location from where the top executives of this smallest bank in india with the lowest profitability though the corporate office is in Trichur (where the H.O. of 2 other bigger banks function ) .Further,to fool the public of Trichur they have started to construct a new corporate building( though a bigger bank with excellent profitability has only a 30000 sq ft H.O. !)Of ONE LAC SQ FT building !
4)Mr.Amitab ,the Md&ceo has , out of the total 39.50 lac ESOPS, 36.50 LAC SHARES OF WHICH 10.50 LAC SHARES TAKEN BY HIM ,26.0 LAC SHARES DISTRIBUTED AMONG HIS COHORTS WHO JOINED THE BANK SINCE 2008 ! THE LOYAL OFFICERS OF THE BANK TOGETHER GOT 3 LA !!!!!
5) onus denied to eligible offices.
6) HAD npa provision coverage provided FOR , THE LOSS WOULD HVE BEE PEHPS IN 3 DIGITS AS THE SHORTAG IS 24 % !!!
Sony Sajan
1 decade ago
I completely agree with bank making losses.but look at the long term story.it is rite nw putting its operations n people rightly bcoz of which pat has taken a hit.the top line nos are awesum.opex going fwd will decline as bank is not planning further branch expansions and employee recruitment.Also we will have to review how good Dhanbank's strategy of getting in secured retail loans work out to be and what is its impact on NIM's.Acc to me its a wait n watch story.bank will show nos post FY11 or mid FY12
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