X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
IDBI Bank: The sheen in question - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Apr 10, 2001

    IDBI Bank: The sheen in question

    IDBI Bank with its new brand identity is in focus these days. The bank is taking initiatives to move in line with the developments taking place in other private sector banks.

    ‘What can i do for you’ is the new corporate brand identity of IDBI Bank, which it is banking on to gain a competitive edge over its rivals in retail business. This new identity is slated to provide the bank with a launching pad for significantly increasing market share backed by superior quality of customer service. IDBI Bank has created a unified brand and has appropriated the lowercase, ‘i’, which signifies the individual in the bank, the consumer and the bank itself.

    IDBI Bank is the first to introduce smart card in India compatible with its ATMs. Under the brand name of ‘MoneySmart’ the bank has launched a card, which will facilitate payment for small value purchase. The bank has already signed up with more than 100 merchant establishments and aims to increase the penetration level to 15,000. This will help it to reduce transaction costs materially.

    IDBI Bank has recently launched WAP and SMS mobile banking services in select metros in an endeavor to offer convenient banking to customers while on move. This product launch marks the beginning of its retail strategy. The bank has upgraded its systems to Finacle banking software from Infosys at an investment of Rs 400 m.

    These initiatives are expected to assist the bank in increasing the contribution of retail assets, which presently account for just 5% of total assets. The bank plans to increase the proportion of retail assets to 25% over the next few years, by expanding its portfolio to cover small and medium enterprises (SMEs). IDBI Bank aims to expand its retail reach from the present 51 branches to 75 branches and introduce 230 high end ATMs from the existing 69 over the next eighteen months. The bank will thus increase its reach, leverage its technological and human resource strength and offer a whole suit of retail products like demat accounts, home loans, educational loans, mutual fund and insurance products.

    IDBI Bank is also eyeing cash management services and is working closely with its parent IDBI. The bank has relationship with around 400 corporates, which it is likely to tap for CMS product. It is expecting to receive a business of around Rs 85 bn in the first year and Rs 160 bn in the second year. As CMS is a low margin and high volume business, foray into this area will help the bank in increasing its revenue base.

    Performance indicators
    Year ended March '00 IDBI
    Bank
    ICICI
    Bank
    HDFC
    Bank
    UTI
    Bank
    Revenues / employee (Rs m) 7.7 6.3 4.5 6.5
    Profits / employee (Rs m) 1.1 0.8 0.8 0.7
    NPM / employee 14.4% 12.7% 17.8% 10.8%
    Deposits / branch (Rs m) 884 1,218 759 1,167
    Deposits / employee (Rs m) 63.0 73.4 42.0 77.4
    NPA / total advances 2.0% 1.1% 0.8% 4.7%

    IDBI Bank’s productivity ratios compares well with other private sector banks. However, the concerns are its association with its parent IDBI, which has large non-performing assets. Also, performance of the bank in first nine months of the current fiscal was unimpressive. Its topline and bottomline (excluding provisions) grew at a marginal rate of 1.9% and 13.2% respectively. Higher provision and contingencies actually led to a fall of 69.2% in net profits. Operating margins declined sharply by 137 basis points to 16.7%, which are comparatively lower than its peers in the industry. The bank’s deposits and advances also grew at a disappointing rate of 22% and 17% respectively.

    At the current market price of Rs 19 IDBI Bank is trading at a P/E of 4 times and Price/Book value ratio of 1 times. The bank’s lower valuations are due to its inability to show improved financial performance due to high cost of funds and non performing assets. The re-rating of the stocks depends on its future growth apart from its technology focus and quality of services provided.

     

     

    Equitymaster requests your view! Post a comment on "IDBI Bank: The sheen in question". Click here!

      
     

    More Views on News

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    Axis Bank: Outside Watchlist Slippages a Big Worry (Quarterly Results Update - Detailed)

    Jul 31, 2017

    Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.

    HDFC Bank: Asset Quality Deteriorates due to Farm Loan Waiver (Quarterly Results Update - Detailed)

    Jul 25, 2017

    Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.

    SBI: Merger Pushes up Bad Loans (Quarterly Results Update - Detailed)

    May 23, 2017

    State Bank of India (SBI) ended FY17 on a healthy note but concerns on bad loans from associate banks remain.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TRACK IDBI

    MARKET STATS