The Oracle of Omaha, Warren Buffett, once said, “Banking is a very good business, unless you don’t do anything dumb.” By the looks of it, Mumbai-headquartered DCB Bank has not done anything dumb for quite a while now. The numbers tell us the story. Over the last five years, the bank’s interest income has grown at 24%, while its profit has grown 37% every year. Its net interest margin (NIM) at 3.9% stands higher than the industry average of 3.3% and gross NPA and net NPA of 1.6% and 0.7% indicates that the bank has a tight leash on its asset quality.
And what’s more, at the end of FY16, the bank’s management set itself a target of doubling its loan book in the next three years through rapid branch expansion and cross-selling of its products. While things are looking pretty for the bank, it has survived through some really rough times to get here.
Back from the brink
In 2008, the bank was in so much trouble that the current CEO,
Murali Natrajan did not want to associate with it when headhunters initially approached him. “When I was approached for the job, I didn’t even want to consider the idea,” he recalls.
He was not wrong in being wary. The asset quality was in shambles due to the aggressive bumping up of its loan book through personal loans prior to FY08. At the end of FY08, the gross NPAs stood at 1.5% and net NPAs stood at 0.7%. A year later when the financial crisis imploded, gross NPAs had climbed to 8.8% and net NPAs were at 3.9% by the end of FY09.
The headhunter who had approached Natrajan told him to at least meet the board before reaching any decision. Natrajan checked out the bank’s board members and the impressive list included Nasser Munjee, Tony Singh and Narayan Seshadri. Singh, his former boss at American Express was not sure if Natrajan was the right man to take the bank forward. “Tony told me given that I have worked only with foreign banks and had no experience of managing the board, he wasn’t sure if I would be able to handle it. He wanted me to make a presentation on what I’d be doing with the bank,” recalls Natrajan. Until then, he had only worked for foreign banks such as Standard C