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.
PSU Banks: VRS powers FY02 - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jun 24, 2002

    PSU Banks: VRS powers FY02

    Public sector banks reported a commendable triple digit growth in earnings for the fourth quarter of FY02. Cost control measures initiated by these banks in the previous year added strong gains to their bottomline. We have included five major banks, SBI, Bank of India, Bank of Baroda, Oriental Bank of Commerce and Corporation Bank in our sector study.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Income from operations 114,793 118,832 3.5% 416,409 463,605 11.3%
    Other Income 23,185 24,403 5.3% 61,458 71,268 16.0%
    Interest expense 77,713 82,108 5.7% 284,295 319,628 12.4%
    Net interest income 37,080 36,723 -1.0% 132,114 143,976 9.0%
    Other expenses 47,285 29,762 -37.1% 125,158 112,183 -10.4%
    Operating Profit (10,205) 6,961 - 6,956 31,794 357.1%
    Operating Profit Margin (%) -8.9% 5.9%   1.7% 6.9%  
    Provisions and contingencies 4,450 14,904 234.9% 28,097 37,537 33.6%
    Profit before Tax 8,530 16,461 93.0% 40,318 65,524 62.5%
    Tax 5,701 7,164 25.7% 14,363 24,374 69.7%
    Extraordinary items 265 (36) - 265 (36) -
    Profit after Tax/(Loss) 3,094 9,260 199.3% 26,220 41,114 56.8%
    Net profit margin (%) 2.7% 7.8%   6.3% 8.9%  
    No. of Shares (m) 1,771 1,645   1,772 1,645  
    Diluted Earnings per share* 7.5 22.5   15.9 25.0  
    P/E Ratio         4.5  
    *(annualised)            

    PSU banks faced one of the challenging years in FY02, with slowdown in non-food credit demand. Non-food credit growth for the industry at 12%, was the lowest in last five years. Consequently, most PSU banks reported a dip in interest income from advances. Bank of Baroda (BoB) and Oriental Bank of Commerce (OBC) however, outperformed its peers by posting a double digit growth in interest from advances. To negate the impact of less demand from corporates, PSU banks forayed aggressively into retail finance with housing being the major focus area. With access to low cost funds, these banks offered competitive rates for retail finance and increased the proportion of retail assets to total assets. Going forward quality of services provided by these banks and delivery time holds key for success in retail finance market.

    With lack of avenues to park their funds, PSU banks increased their investments into government securities. PSU banks in general opted to hold long maturity portfolio and consequently, their income from investments witnessed a healthy growth of 20%. However, as bond prices declined, these banks seem to have booked losses in the fourth quarter, which is reflected in a marginal 5% rise in their fee-based income. Also, in the current fiscal, their interest income from investments may not grow at higher rates, as incremental investments into G-Sec paper is likely to be at around 8-9%.

    Income breakup
    (Rs m) FY01 FY02 Change
    Interest on advances 193,470 198,286 2.5%
    Income from investments 173,714 209,194 20.4%
    Interest on balance with RBI 28,615 40,050 40.0%
    Others 20,609 16,075 -22.0%
    Total 416,408 463,605 11.3%

    PSU banks successfully reduced their cost to income ratio to 52% in FY02 (65% in Fy01) through VRS and gradual improvement in technology. Most of these banks have computerized over 75% of their business and are planning to implement core banking solutions in the current fiscal. Cost to income ratio is expected to come down further as these banks improve productivity (by going for second round of VRS) and upgrade technology. Significant reduction in employee cost fueled operating margins of the sector to 7%, which is otherwise under pressure due to more than proportionate rise in interest cost.

    Currently, PSU banking sector is trading at a P/E of 4.5x FY02 earnings and price to book value (PBV) ratio of 0.8. However, after adjusting for net-non performing assets, PBV ratio is expected to be in the range of 1.5 to 2x. Over the last three months, PSU banking stocks, save for Corporation Bank and SBI witnessed good buying interest. FY03 could be another strong year for the sector if credit demand remains buoyant through out the year. Considering a revival in commodity prices and improvement in demand from small corporate borrowers, FY03 could be relatively better year in terms of increase in interest income.

     

     

    Equitymaster requests your view! Post a comment on "PSU Banks: VRS powers FY02 ". 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 Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    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?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    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

    ORIENTAL BANK SHARE PRICE


    Aug 22, 2017 03:25 PM

    TRACK ORIENTAL BANK

    • Track your investment in ORIENTAL BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    ORIENTAL BANK - WELLS FARGO COMPARISON

    Compare Company With Charts

    COMPARE ORIENTAL BANK WITH

    MARKET STATS