Prabhudas Lilladher has issued a buy rating on DCB Bank with a target price of ₹215 in its latest research report dated July 28, 2026, valuing the bank at 0.9x FY28E P/BV. The brokerage's recommendation comes alongside The Hindu BusinessLine's existing buy rating with a ₹216 target price and ICICI Securities' ₹260 target price, demonstrating broad analyst consensus on the bank's potential. The current market price stands at ₹190.20, indicating significant upside potential from all three brokerages' target prices.
DCB Bank delivered exceptional quarterly results with Q1FY27 PAT of ₹2.13 billion, growing 36% year-on-year and beating estimates by 8%. As reported by The Hindu BusinessLine, the strong performance was driven by 18% NII growth and a 50% decline in provisioning, demonstrating robust operational efficiency. Net Interest Income (NII) grew 18% YoY to ₹6.8 billion, meeting analyst expectations and showing a 4% quarter-on-quarter increase. Net Interest Margins (NIMs) expanded 15 basis points year-on-year to 3.35%, with management expecting further expansion from Q2 onwards as higher-yield mortgages and agri products take larger share of sourcing. Prabhudas Lilladher notes that while reported NIM was 4 basis points down QoQ to 3.35%, margins may improve led by better yields due to loan mix and fall in deposit cost. The bank's Return on Assets (RoA) and Return on Equity (RoE) reached record levels of 0.96% and 13.61% respectively, while Cost-to-average assets hit a record-low 2.42%.
Advances grew 17.1% year-on-year to ₹59,951 crore, driven by mortgages, gold loans and Agri and Inclusive Banking segments. According to The Hindu BusinessLine, deposits increased 20.1% year-on-year to ₹74,482 crore, indicating strong liability growth. Core fee income grew 31% year-on-year to ₹175 crore, demonstrating robust fee-based income generation. Asset quality improved significantly with GNPA/NNPA at 2.43%/0.84%, while Provision Coverage Ratio (PCR) stood at 79.8% and credit cost at 26 basis points. The bank's CRAR stood at 17.03%, providing adequate growth capital for future expansion. Prabhudas Lilladher notes that while loan growth was muted due to seasonality, they don't see risk to their loan CAGR assumption of 17%.
The bank's Cost-to-average assets fell by 2.6% in FY25 to 2.45% FY26 and is likely to further decline to 2.3%, as reported by Prabhudas Lilladher. Management expects GNPA below 2.50% and NNPA below 1.00% going forward, with business-model credit cost of 45-55 basis points of average assets. As per Prabhudas Lilladher, the bank maintains margin of safety of 3-4x and expects cost-to-income ratio of 60% or below. The management anticipates further cost-of-deposit reduction of 7-8 basis points per quarter versus the 14 basis points achieved in Q1. Prabhudas Lilladher projects NIM improvement of ~5 basis points for FY27/28E to 3.15% each, while ICICI Securities projects 16-17% CAGR in loans and approximately 1% RoA for FY26-28E.
