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GTB: Sheen under pressure - Views on News from Equitymaster
 
 
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  • Aug 6, 2001

    GTB: Sheen under pressure

    Global Trust Bank (GTB) has reported a huge 56% drop in first quarter profits due to over 148% jump in provisions and a 2% fall in interest income.

    (Rs m) 1QFY01 1QFY02 Change
    Interest Income 2,049 2,004 -2.2%
    Other Income 545 606 11.1%
    Interest Expenditure 1,525 1,768 16.0%
    Operating Profit (EBDIT) 524 236 -54.9%
    Operating Profit Margin (%) 25.6% 11.8%  
    Other Expenditure 454 385 -15.2%
    Profit before Tax 615 456 -25.8%
    Provisions & contingencies 112 277 148.2%
    Tax 132 17 -87.4%
    Profit after Tax/(Loss) 372 163 -56.1%
    Net profit margin (%) 18.1% 8.1%  
    No. of Shares (eoy) 121.4 121.4  
    Diluted Earnings per share* 12.2 5.4  
    P/E (at current price)   4  
    *(annualised)      

    The bank's operating margins in 1QFY02 declined to 12% from 26% in the 1QFY01 and 22% in FY01. Due to reduction in the low cost deposits, the bank's interest cost increased substantially. The bank's alleged link with the scam tainted broker has resulted in the flight of saving account deposits.

    During the quarter, GTB's cost to income ratio increased to 46% (43% in 1QFY01). However, the ratio was in line with 45% in FY01. The bank's investments in infrastructure (ATMs and branch) to expand its reach has fueled the ratio.

    GTB has provided Rs 22 m as depreciation on investments in 1QFY01. The amount has been reduced to Rs 4 m in the current quarter. GTB's relatively high exposure to the capital markets has resulted in dimunition in value of its investments.

    At the current market price of Rs 21, GTB is trading at a P/E of 4x its 1QFY02 annualised earnings. Its Price/Book value ratio of 0.4x reflects the company's dwindling earnings and sluggish growth in the business. Although, its healthy capital adequacy ratio of 13.6% offers the bank an opportunity to expand its size, in the competitive scenario it will be tough for the bank to grow its business.

     

     

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