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GTB: Interest spread slides

Jan 9, 2001

Global Trust Bank (GTB) has reported an impressive 38% rise in interest income for the quarter ended December 2000. However, due to higher other expenses and tax provision, profits of the bank witnessed a decline of 0.1%.

(Rs m) 3QFY00 3QFY01 Change
Interest Income 1,494 2,058 37.7%
Other Income 480 675 40.7%
Expenditure 1,209 1,709 41.4%
Operating Profit (EBDIT) 286 349 22.3%
Operating Profit Margin (%) 19.1% 17.0%  
Other Expenses 183 275 50.1%
Depreciation 107 122 14.6%
Profit before Tax 476 627 31.9%
Provisions and contingencies 134 101 -24.5%
Tax 63 182 190.4%
Profit after Tax/(Loss) 547 546 -0.1%
Net profit margin (%) 36.6% 26.5%  
No. of Shares (eoy) (m) 104.0 121.4  
Diluted Earnings per share* 18.0 18.0  
P/E (at current price) 4.8 4.8  
*(annualised)      

The bank's operating margins during the quarter declined sharply by 200 basis points to 17%. Due to pressure on the interest spread profit margins of the bank dropped significantly. The bank has comparatively lower OPM than other private sector banks. Also, other expenditure of GTB (79% of operating profit) increased as a result of its retail thrust (in setting up ATMs). Notwithstanding the above facts, profit before tax of the bank grew by 32% fueled by higher other income.

During the quarter GTB's advances and deposits witnessed a growth of 44% and 40% respectively. However, credit/deposit ratio of the bank declined to 48.6% (from 50.1% in 3QFY00).

At the current market price of Rs 86 GTB is trading at a P/E multiple of 5 times its 3QFY01 earnings and a Price/Book Value ratio of 1.7 times.

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