GTB: Profits dip again

Global Trust Bank (GTB) has again reported a dismal performance for the quarter ended June 2002. The bank's first quarter profits declined by over 20% and interest income was also down by 16%. Its net interest income however, witnessed a growth of 28% due to a steep reduction in interest cost.

(Rs m)	1QFY02	1QFY03	Change
Income from operations	2,004	1,686	-15.9%
Other Income	606	305	-49.6%
Interest expense	1,768	1,384	-21.7%
Net interest income	236	302	27.9%
Other expenses	382	406	6.3%
Operating Profit	(146)	(104)	-28.8%
Operating Profit Margin (%)	-7.3%	-6.2%
Provisions and contingencies	280	72	-74.2%
Profit before Tax	180	129	-28.0%
Tax	17	-	-
Profit after Tax/(Loss)	163	129	-20.7%
Net profit margin (%)	8.1%	7.7%
No. of Shares (m)	121.4	121.4
Diluted Earnings per share*	5.4	4.3
P/E Ratio		4.5
*(annualised)

Apart from a decline in the bank's core interest income, fee based income also witnessed a sharp fall. The contribution of non-interest income to total income declined to 15% from 24% in FY02. While interest income recorded a dip, the bank's operating expenses continue to rise. Consequently, its cost to income ratio jumped to 67% in 1QFY03 from 45% in the comparable previous quarter.

As part of its business restructuring, GTB aims to continue its thrust on quality growth, improve internal systems & procedures and enhance its portfolio of products & services significantly in FY03. Towards this end, the bank has taken up a number of steps including scaling down of exposure limits to capital markets, reconstitution of credit committees, reducing higher risk portfolios, reviewing and restructuring industry wise exposure and establishment of highly skilled corporate banking teams at strategic locations. The bank also aims to bring down its high cost deposits and reduce asset size.

At the current market price of Rs 19, GTB is trading at a P/E of 5x 1QFY03 annualised earnings and price to book value ratio of 0.6x. Its capital adequacy ratio (CAR) at 11% is likely to assist the bank in its business expansion. However, it would take some time for the bank to rebuild its brand and attract business volumes.