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GTB: Profits dip again

Aug 6, 2002

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)1QFY021QFY03Change
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)163129-20.7%
Net profit margin (%)8.1%7.7% 
No. of Shares (m) 121.4 121.4  
Diluted Earnings per share*5.44.3 
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.

Interest income break-up
(Rs m)1QFY021QFY03Change
Interest on advances 1,130 950 -15.9%
Income on investments 828 693 -16.4%
Interest on balance with RBI 32 43 32.6%
Others 14 0 -98.6%
Total 2,004 1,686 -15.9%

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.

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