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OBC: Commendable performance - Views on News from Equitymaster
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  • Feb 15, 2002

    OBC: Commendable performance

    Oriental Bank of Commerce (OBC) has reported relatively better performance among the state run banks. The bank managed to post double digit growth in income from operations for the quarter ended December 2001 and a 31% jump in net interest income.

    (Rs m) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change
    Income from operations 6,676 7,690 15.2% 20,483 22,338 9.1%
    Other Income 798 1,210 51.6% 1,886 2529.3 34.1%
    Interest expense 4,811 5,240 8.9% 14,747 15,280 3.6%
    Net interest income 1,865 2,450 31.4% 5,736 7,058 23.0%
    Other expenses 1,876 1,937 3.3% 4,153 4,579 10.3%
    Operating Profit (11) 514   1,583 2,479 56.6%
    Operating Profit Margin (%) -0.2% 6.7%   7.7% 11.1%  
    Provisions and contingencies 540 -215 -139.7% 1,218 970 -20.4%
    Profit before Tax 247 1,938 683.4% 2,251 4,038 79.4%
    Tax 225 1,081 380.4% 675 1,771 162.2%
    Profit after Tax/(Loss) 22 857 3727.8% 1,576 2,268 43.9%
    Net profit margin (%) 0.3% 11.1%   7.7% 10.2%  
    No. of Shares (m) 192.5 192.5   192.5 192.5  
    Diluted Earnings per share* 0.5 17.8   10.9 15.7  
    P/E Ratio   2.2     2.6  

    The bank's operating margins also improved sharply in the first nine months of FY02 to 11% on the back of savings in employee cost. The bank had launched voluntary retirement scheme in FY01, which is helping it prune its employee costs. Its cost to income ratio consequently declined to 48% in the first nine months of FY02 from 55% in the comparable previous period.

    During the first nine months, the bank's income from loans recorded a strong growth of 17%. In third quarter too, interest income rose by 14%. This is a commendable performance compared with a single digit growth or a decline in interest income reported by other public sector banks. The bank's interest income accounts for 46% of total operating income. OBC's investment income on the other hand, witnessed a marginal growth of 4% contributing 51% to the total.

    (Rs m) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change
    Interest on advances 3,063 3,480 13.6% 8,749 10,228 16.9%
    Income on investments 3,421 3,954 15.6% 10,966 11,447 4.4%
    Interest on balance with RBI 192 256 33.4% 709 662 -6.7%
    Others - -   59 2 -96.3%
    Total 6,676 7,690 15.2% 20,483 22,339 9.1%

    At the current market price of Rs 40, OBC is trading at a P/E multiple of 3x and adjusted Price/Book value ratio of 0.7x FY02 projected earnings. The bank's stock has not witnessed a sharp rise in the current rally in the banking sector. Considering its valuations, which are currently lower compared to its peers and its earnings growth, the stock looks attractively priced.



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