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Post LVB Merger, DBS Bank India Reports Higher Net Profit For FY21; Npas Zoom

The gross non-performing assets of the combined entity shot up to 12.93 per cent, with a bulk of the strain coming from the erstwhile LVB's portfolio.

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DBS Bank India, the wholly-owned subsidiary of the Singaporean lender, witnessed a surge in FY21 net profit at Rs 312 crore on the merger of Lakshmi Vilas Bank (LVB), but reported a huge spike in dud loans as a result of the amalgamation with the old-age private sector bank.

DBS Bank India, which bailed out LVB and in the process increased its network, had reported a post tax net of Rs 111 crore in FY20.

The gross non-performing assets of the combined entity shot up to 12.93 per cent, with a bulk of the strain coming from the erstwhile LVB's portfolio. The net NPAs stood at 2.83 per cent with a provision coverage ratio of 84 per cent.

The bank’s managing director and chief executive Surojit Shome acknowledged the pain on the asset quality front and the operating losses and also called it as being on “expected lines”.

“…We are confident of realising the long-term prospects of the combined franchise,” Shome said.

There has been “considerable progress” with the integration of LVB since the amalgamation in November 2020 even with the dislocations due to the second wave of the pandemic, he said, adding that the immediate priority is to integrate the operating systems and processes.

DBS has been able to “revitalise the gold loans business and grow deposits”, Shome added.

The bank reported a 44 per cent increase in the overall deposits to Rs 51,051 crore, including Rs 18,823 crore of it from LVB, an official statement said, adding savings deposits grew 207 per cent, current account was up 98 per cent.

The share of low-cost current and savings account deposits after the merger with LVB, which had 563 branches, improved to 31 per cent from 18 per cent earlier, it said.

The net advances grew to Rs 36,973 crore, including Rs 10,685 crore which came from LVB, it said.

With the infusion of Rs 2,500 crore capital into the bank from the parent during the fiscal year, the overall capital adequacy ratio for DBS Bank India stood at 15.13 per cent, with the core CET1 at 12.34 per cent.

In November, RBI and the government announced the merger of the domestic private sector lender with an entity wholly owned by a foreign bank, wherein the Singaporean lender assured to pump in the additional capital.

The scheme, which also faced legal challenges, was announced after other proposals did not make their way through.

At present, DBS Bank India has 600 branches in 19 states and 5,500 employees.

The DBS statement said, after the amalgamation, the bank's primary focus has been on welcoming the employees and customers of LVB into the DBS family, unifying the LVB and DBS workforces and re-building the LVB business.

The integration of operating platforms and branches is currently underway. The steady growth in LVB current and savings account balances as well as in the gold loans portfolio in 2021 is an early indicator of the success of the current strategy, it added.