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Monday, August 13, 2012

Quarterly numbers: Dhanlaxmi Bank under scanner

What's brewing at Dhanlaxmi Bank? The auditors of the old private sector lender have resigned earlier this month following certain differences with the management while the banking regulator suspects that some of the shareholders of DLB are acting in concert.

The auditors Walker Chandiok & Co - the local audit arm of the management and audit consultancy Grant Thornton - have put a question mark on some of the bank's performance numbers for the quarter ended June 2012.

Dhanlaxmi CEO & managing director PG Jayakumar said that there was no "truth in the statement" and added that the bank had not received any communication from RBI on shareholding issues.

But, it is believed that the auditors were not comfortable with the sudden spurt reported by the bank in its yield on advance for the June quarter. The bank's yield on advances - which simply put, is the ratio between total interest income on advances and average advance outstanding for the period - rose to 13.27% from 11.35% in the previous quarter. A two percentage point rise in yield on advances in a single quarter is very unusual for a bank unless there is a big surge in unsecured loans where interest charges are higher.

The bank's net interest margin-the difference between interest income and interest expenses upon interest earning assets-has increased from 1.53% to 2.50%. Such an improvement in margins is also rare in a quarter simply because it is difficult for a bank to replace high-cost liabilities with cheaper deposits within such a short span.

The bank recently announced its unaudited quarterly numbers which are released after a limited review by the auditors.

When contacted, Khusroo Panthaky, partner at Walker Chandiok & Co, declined to comment. The auditors, it's learnt, will continue with the DLB till the bank's annual general meeting.Sources said that towards end May, RBI had pointed out that two individual shareholders along with a few funds were acting in concert. In this case, the individual concerned have been former business partners. In case of DLB, one of the shareholders in question has certain influence on the board.

Source: EconomicTimes


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