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GTB: Acquisition target?

Feb 19, 2002

Despite challenging business environment, private sector banks in general reported a strong rise in interest income, which boosted their profit growth. Global Trust Bank, on the other hand, maintained its dismal performance in the third quarter of FY02. A 14% drop in income from operations is reflective of loss of confidence in the bank.

(Rs m)3QFY013QFY02Change9m FY019m FY02Change
Income from operations 2,120 1,826 -13.9% 6,551 5,720-12.7%
Other Income 613 608 -0.8% 1,058 1,682 58.9%
Interest expense 1,709 1,549 -9.4% 4,858 5,0113.1%
Net interest income 411 277 -32.6% 1,693 709-58.1%
Other expenses 397 396 -0.2% 1,186 1,2404.6%
Operating Profit 14 (119) 507 (531)-204.7%
Operating Profit Margin (%)0.7%-6.5%7.7%-9.3%
Provisions and contingencies 101 400296.5% 195 849335.8%
Profit before Tax 527 89-83.1% 1,370 302-78.0%
Tax 182 0- 340 0-
Profit after Tax/(Loss) 344 89-74.1% 1,030 301-70.8%
Net profit margin (%)16.2%4.9%15.7%5.3%
No. of Shares (m) 121.4 121.4 121.4 121.4
Diluted Earnings per share*11.42.911.33.3
P/E Ratio9.78.6
*(annualised)

The bank is facing stiff competition in the lending business and its relatively higher cost of borrowings has led to a steep decline in operating margins over the quarters. During the first nine months of FY02, GTB posted operating loss of Rs 531 m (excluding other income). Its interest income from advances fell by 17% and income from investments too was lower by 5%. These two revenue streams, which account for about 98% of total interest income witnessed a decline of 12%.

A sharp rise in other income however, enabled the bank to report profits in the first nine months of FY02. Other income contributed 23% to total income from 14% in the comparable previous period. During the period the bank provided higher amount for bad loans resulting in four fold rise in provision figure. This contributed to the 71% drop in net profits.

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