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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) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change
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 5,011 3.1%
Net interest income 411 277 -32.6% 1,693 709 -58.1%
Other expenses 397 396 -0.2% 1,186 1,240 4.6%
Operating Profit 14 (119)   507 (531) -204.7%
Operating Profit Margin (%) 0.7% -6.5%   7.7% -9.3%  
Provisions and contingencies 101 400 296.5% 195 849 335.8%
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* 11.4 2.9   11.3 3.3  
P/E Ratio   9.7     8.6  

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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