Kerala-headquartered Dhanlaxmi Bank reported an 82.81% year-on-year drop in net profit to Rs 2.3 crore in the fiscal third quarter amid a sharp fall in other income. 

The lender had posted a net profit of Rs 11.81 crore in the year-ago period and Rs 3.66 crore in Q2 of FY22.

Asset quality improved with gross non-performing asset (NPA) ratio standing at 7.55% for the quarter ended December 31, 2021 versus 8.67% a quarter ago and 5.78% a year ago. At the end of the quarter, the bank had bad loans of Rs 570 crore, with fresh additions contained at Rs 25 crore. Fresh bad loan additions in the preceding quarter was at Rs 136 crore.

Net NPA ratio stood at 3.83 % compared to 4.92 % a quarter ago and 1.11 % in the year-ago period.

The bank has improved on certain parameters like net interest income, credit-to-deposit ratio and cost of funds. Operating profit has grown in the December quarter, after seeing many quarters of fall. 

Net interest income (NII) has grown to Rs 96 crore in the fiscal third quarter from Rs 91 crore a year ago. Net interest margin (NIM) was almost flat at 2.94% but improved sequentially from 2.85% in Q2 of FY22.

“The bank has improved on all the operating parameters. Total business, advances, NII, NIM, CD ratio and NPA levels have improved. SMA (special mention accounts) has also dipped considerably. Almost the entire operating profit has gone towards provisions for restructured assets, ageing provisions, pension and gratuity provisions,” said Dhanlaxmi Bank managing director and CEO JK Shivan. 

Capital buffers had to be offered to the restructured assets, ageing provisions, pensions and gratuity. The bank reported a 10% growth in advances to Rs 7,552 crore as on December 31, 2021, while deposits grew 6% to Rs 12,101 crore.

Retail deposits grew 3.12% to  Rs. 6,183 crore at the end of the quarter ending December 2021. 

Advances under SME and agricultural sector grew 19.83% and 8.24% to Rs 1,148 crore and 762 crore respectively.

Provisions and contingencies increased to Rs 26.29 crore versus Rs 22.92 crore a year ago and Rs 22.60 crore a quarter ago.

The bank’s total income fell 6.77% YoY to Rs 269.16 crore in the December quarter while interest income fell to Rs 234.63 crore from Rs 237.36 crore. Other income decreased to Rs 34.53 crore from Rs 51.35 crore.

“Treasury income has fallen for everyone due the increasing interest rate environment,” said JK Shivan, adding that the treasury income will be non-existent with interest rates set to rise.

Dhanlaxmi Bank is looking to improve its CD ratio from the current level of 64% to 68% by the end of March and then to 75% by the next financial year, which will further expand its loan base.