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.
Oriental Bank: Topline concerns - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jul 28, 2003

    Oriental Bank: Topline concerns

    OBC, one of the most efficient public sector banks in the country, has reported a disappointing topline performance for the June quarter. Bottomline growth, however, has been strong. While the topline has recorded a negative growth of 2.5%, bottomline has jumped by 38%. Significant fall in interest expenses as well as a strong growth in other income has helped the bank to redeem its bottomline performance in the June quarter.

    (Rs m) 1QFY03 1QFY04 Change
    Income from Operations 8,207 8,003 -2.5%
    Other Income 745 1,817 143.7%
    Interest Expenses 5,616 4,893 -12.9%
    Net interest income 2,591 3,110 20.0%
    Other Expenses 1,354 1,561 15.3%
    Operating Profit 1,237 1,549 25.2%
    Operating Profit Margin (%) 15.1% 19.4%  
    Provisions and Contingencies 455 1,126 147.6%
    Profit before Tax 1,527 2,239 46.6%
    Tax 500 820 64.1%
    Profit after Tax/(Loss) 1,027 1,419 38.1%
    Net Profit Margin (%) 12.5% 17.7%  
    No. of Shares (m) 192.5 192.5  
    Diluted Earnings per share* 21.3 29.5  
    P/E Ratio   6.1  

    OBC's interest income from advances and investments have shown a decline in the June quarter. This may indicate that the bank is facing pressure from competition and falling interest rates. While details of growth or otherwise in advances are not clear, we believe that the bank is facing pressure on the same. Also, due to its large exposure to the small and medium enterprises segment, for which it reduced its lending rates recently, the bank seems to be facing pressure on yields. OBC may face increasing pressure on its spreads due to this reason. Soft interest rates have however helped the bank to reduce its interest expenses, thus more than compensating for the fall in topline. Net interest income, thus, has risen by 20% in the June quarter.

    On the operational front, OBC has seen a 16% rise in employee expenses thus leading to a 15% rise in operational expenses. Despite this the bank has been able to improve its operating margins by 430 basis points. Cost to income ratio has also improved to 32% in the June quarter (41%) compared to the same period last year. Operational efficiency is likely to improve further as VRS expenses get completely written off.

    OBC has seen a significant rise in its other income, seemingly due to booking of profits on the G-Sec portfolio. The bank seems to have however used a large part of these gains to significantly increase provisioning in the June quarter. Increased provisioning may also have been the result of the new 90 day NPA classification norm, that banks have to adhere to. Net NPA to advances ratio stood at 1.4% at the end of FY03.

    At the current market price of Rs 181, OBC is trading at a P/E ratio of 6x its annualised 1QFY04 earnings. The stock has risen considerably in the recent past and valuations seem to be on the higher side considering the bank's PSU status. While OBC has a strong balance sheet and comparatively good quality of assets, we feel that the recent rally in the scrip was more speculative in nature. Also, while the bank has managed to achieve a strong bottomline growth, the fall in topline nevertheless remains a cause of concern. Going forward investors may need to keep a close watch on the bank's initiatives to grow business as well as handle competition.



    Equitymaster requests your view! Post a comment on "Oriental Bank: Topline concerns". 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

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    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.

    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.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    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


    Aug 18, 2017 (Close)


    • 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


    Detailed Quarterly Results With Charts