Higher depreciation hit IDBI Bank's profits - Views on News from Equitymaster

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Higher depreciation hit IDBI Bank's profits

Jan 30, 2001

IDBI Bank reported a growth of 23% in operating profits for the quarter ended December 2000. However, higher depreciation and provisions led to a decline of 49% in net profits.

(Rs m) 3QFY00 3QFY01 Change
Interest Income 1,098 1,391 26.6%
Other Income 137 176 28.1%
Interest Expenditure 883 1,126 27.5%
Operating Profit (EBDIT) 216 265 22.8%
Operating Profit Margin (%) 19.6% 19.1%  
Other Expenditure 116 189 62.7%
Depreciation 28 75 163.0%
Profit before Tax 208 177 -15.1%
Provisions & Contingencies 0 70  
Tax 64 33 -47.6%
Profit after Tax/(Loss) 145 74 -48.8%
Net profit margin (%) 13.2% 5.3%  
No. of Shares (eoy) 140 140  
Diluted Earnings per share* 4.1 2.1  
P/E (at current price) 6.8 13.2  
*(annualised)      

The bank's deposits and advances increased by 22% and 17% respectively for the nine months ended FY01. Credit to deposit ratio however, declined to 43% (from 45%) during the same period.

Depreciation charge of the bank grew by more than 160% during the quarter. This was due to higher rate of (33.3%) depreciation on computers as per the RBI's recent guidelines. This resulted in an additional charge of Rs 42.8 m for the quarter.

At the current market price of Rs 28, IDBI Bank is trading at 13 times its 3QFY01 annualised earnings. Its Price/Book value ratio of 1.5 times is comparatively lower than other private sector banks.


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