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Dena Bank Advances V/s Industry Advances
30%
25%
20%
15%
10%
5%
0%
Source: Company Data, Nirmal Bang Research
Major Exposure In The State Of Gujarat
The state of Gujarat has grown at a rate of 11% in 2011 as
compared to the all-India average growth of 9%. Between
2005 and 2010, the real GDP growth in Gujarat has been
11.3%, highest among all the states in India.
Dena Bank has a major presence in Gujarat.
Approximately 41% of the total branches are located in
Gujarat. We believe that higher exposure in the state will
help the bank to garner higher CASA and enjoy better
advances growth.
Change In Mix: Focus On High Yielding Assets
Historically, Dena Bank’s loan portfolio has inclined
towards corporate lending contributing above 50% of the
total advances. However, the bank has now shifted its
focus more on the small and medium enterprise (SME) and
retail segment to exploit the potential in these
high-yielding segments.
Currently, agriculture, SME and retail segments contribute
approximately 43% of the total current loan book. We
believe the bank’s advances will be achieved through
high-yielding SMEs and the retail portfolio. The bank is
targeting a growth of around 25% in its retail portfolio for
FY12E.
Strong CASA
26% 25%
26%
22%
23%
22%
21%
19%
17% 17%
18% 20%
2008 2009 2010 2011 2012E 2013E
Dena Bank Advances Industry Advances
Dena Bank’s strength lies in having a very strong
concentration of its branches in CASA-rich regions of
western India.
Approximately 65% of the Bank’s branches are located in
western India and the bank also has a strong presence in
rural and semi‐urban areas, which gives the bank access to
low‐cost deposits, thus helping the bank in garnering
higher current and saving account (CASA) ratio. Dena
Bank has been able to register one of the highest CASA
ratios among PSU banks.
CASA Of PSU Banks (FY11)
45.3% 38.5% 35.4% 35.0% 33.5% 28.7% 24.5% 28.3%
Source: Company Data, Nirmal Bang Research
Protection Of NIMs
With increasing interest rates and cost of deposits, the
NIMs (net interest margins) of the bank are expected to
remain under pressure.
However, a recent equity infusion of `600 crore will help
the bank to maintain margins in FY12E. The management
is confident that the bank will be able to maintain NIMs at
around 3% for FY12E. Nevertheless, we factor in a 20 bps
decline in margins for FY12E.
Net Interest Margins
Source: Company Data, Nirmal Bang Research
Beyond Market 10th Oct ’11 It’s simplified... 29
50%
40%
30%
20%
10%
0%
` in Crs
3000
2500
2000
1500
1000
500
0
SBI
PNB
2.9%
Dena Bank
2.4%
Central Bank
3.1% 2.9% 2.9%
FY 2009 FY 2010 FY 2011 FY 2012E FY 2013E
NII NIMs
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Asset Quality To Remain A Cause Of Concern In The
Near Term
Asset quality has been a cause of concern for the public
sector bank, Dena Bank. But with increasing efforts taken
by the bank to recover and minimize new slippages, the
bank has been able to maintain its NPA levels in a
comfortable zone.
The bank has set up recovery teams and specialized
monitoring systems to take care of the asset quality. This
has started showing good results as recoveries have
increased. The bank further expects higher recoveries in
FY12E.
However, there are some near-term concerns that the bank
is facing currently. Dena Bank has an extremely high
exposure of approximately `9,000 crore in the power
industry. Of this huge amount, around `6,000 crore (March
’11) are to State Electricity Boards (SEBs) on a short‐term
working capital basis.
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