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Global Trust Bank: FY04 numbers - Views on News from Equitymaster

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Global Trust Bank: FY04 numbers

Aug 10, 2004

Global Trust Bank (GTB) approved the audited accounts for FY04 at its meeting held yesterday. The accounts were finalized in the backdrop of the proposed draft scheme of amalgamation with Oriental Bank of Commerce (OBC). GTB posted a net loss of Rs 8.1 bn during FY04 (loss of Rs 2.7 bn in the previous year). The loss is on account of provisioning of about Rs 5.4 bn necessitated largely by aging and weakening of security of earlier NPAs. There was an operating loss of Rs 790 m and about Rs 1.6 bn towards accelerated and prudent provisioning on select items including non-banking assets and the balance amount of Rs 350 m towards other provisions.

On the business front, the low cost deposits, i.e. current account and savings deposits, posted a growth of about 28.6% and 30.8% respectively in FY04. Consequently, the share of retail deposits improved to 74% of the total deposits. The growth was driven by acquisition of over 77,000 new retail customer accounts.

On the assets side, advances and investments were curtailed in view of capital constraints and the need to stay liquid. The focus on recovery continued. As a result, an additional Rs 3.2 bn were recovered from NPAs and written off.

Our view

There was no swap arrangement or cash consideration for the GTB acquisition by OBC. While OBC is likely to benefit over a period of time from this acquisition (more than 103 branches with higher productivity compared to OBC), as a shareholder of GTB, there is no other option but to exit the stock, as the bank will cease to exist independently going forward.

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