Jun 27, 2001|
Bank of Punjab: A dividend play
Bank of Punjab (BOP), a new private sector bank, declared a marginal 5% rise in profits on the back of a huge 57% jump in provisioning amount in FY01. The bank's topline however grew sharply by 30%.
|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 has also showed an improvement of over 500 basis points in its operating margins to 33% due to reduction in interest cost. As a result its operating profits soared by 54%. An increase in cost to income ratio to 59% in FY01 from 53% in FY00 however trimmed the profit growth of the bank (before taxes) to 14%.
A downturn in the industrial activity beginning fourth quarter of the year took toll on the bank's performance. BOP provided Rs 229 m as provision for non-performing assets which was higher by 57% compared to the previous year. In the last four years, BOP's provisioning amount has increased at a compounded annual growth rate (CAGR) of 129%. The bank's NPA ratio as on FY00 stood at 2.3%.
At the current market price of Rs 14, BOP is trading at a P/E of 4x and Price/Book value ratio of 0.8x. The bank has declared a dividend of 14%, which indicates a dividend yield ratio of 10% (tax free). BOP's capital adequacy ratio at 11% is comfortable and will aid the bank in its future expansion. The stock deserves a look if we consider only dividend yield ratio at 10%, which is relatively on a higher side in the current scenario of falling interest rates.
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