Karur Vysya Bank (KVB) one of the premier old private sector banks, has reported a dismal growth in profits for the year ended March '01. The bank's operating margins took a severe hit in the fourth quarter resulting in a substantial drop in profits.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Provisions & Contingencies
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy)
Diluted Earnings per share*
P/E (at current price)
The bank's OPMs which was continuously rising till 3QFY01 (37.3%), declined to 26% in 4QFY01. The reason could be attributed to an increase in cost of funds leading to pressure on margins. A more discouraging fact is the 7% decline in interest income in the fourth quarter. The bank has failed to maintain a healthy growth rate in the competitive scenario with the slowdown in the credit growth.
The advances and deposits witnessed a growth of 25% and 17% respectively in FY01. Its credit to deposit ratio too increased to 62% from 59% in the previous year. Although, higher ratio indicates a positive sign, poor quality of its assets (loans) could result in higher provision for non-performing assets. Its capital adequacy ratio of 15.6% is above the RBI stipulated 9%, allowing the bank for further expansion of its balance sheet.
It was tough times for KVB in the last quarter of FY01. Apart from a 36% fall in operating profits, cost to income ratio of the bank jumped to 61% (41% in 4QFY00) and tax rate increased to 28% (8% in 4QFY00). These factors cumulatively contributed to a negative growth in profits for the fourth quarter.
At the current market price of Rs 283 Karur Vysya Bank is trading at a P/E of 2.4 times FY01 earnings. Its Price/Book value ratio of 0.5x is significantly low compared to its private sector peers. This is due to its relatively low growth and regional nature (South based).
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