Dhanlaxmi Bank tries to regain investor confidence

Dhanlaxmi Bank will focus on increasing its retail business and cutting costs, CEO PG Jayakuma announced in trying to regain investor confidence.

He added that the bank's mission was to move towards a branch-centric model.

Investors shunned the bankls shares on the back of management change due to poor financials. In the last three months Dhanlaxmi shares went down nearly 54% as against 23% rise in the Bank Nifty, a barometer for banking stocks in the NSE.

Dhanlaxmi Bank is still confident of its growth by its cost cutting measures.

"We are not shutting down any branch. Our focus will be on retail. We may re-price our corporate loans, which are not earning enough rate of interest. We aim to register a net interest margin of around 2.50%, which is currently below 2%. We will continue aggressively as a pan India institution. We will work in a branch centric model," he said.

However, the market does not seem to be convinced about it. Rather, they prefer to monitor the bank's financials in the coming few quarters.

"The bank was running in losses due to operational expenses. Some initiatives by the new management will fix that. However, re-pricing of corporate loans will not happen so easily. There has to be takers for it. Moreover, fund raising will continue to be an issue. Market will not subscribe any fresh offering by the bank in this current context," a chief investment officer told Moneycontrol.com on condition of anonymity.

"Market expected the bank to be acquired by any reputed group. Now, it will not happen as the management scorched all rumours. Market, in turn, will treat it as a negative trigger for the stock. Moreover, the bank needs to generate enough public deposits to regain confidence. This will take time," said Manish Innani, founder and director, Prayas Securities.

The private sector lender, according to a section of the market participants, will struggle to collect public deposits as it does not belong to any reputed group.

The bank has embarked on a cost cutting measure wherein it has effected 40% cut in salary and reduced its staff strength by 300 to around 4,200. As on December 31, its total loan book stood around Rs 9,550 crore of which corporate loans, mostly in the form of term loans, constituted around Rs 5,000 crore.

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