Vysya Bank has reported dismal performance again with 8% drop in interest income and higher operating loss of Rs 301 m. The bank's net profits however, rose by over 10% due to higher other income and a 41% drop in provisions for non-performing assets.
Income from operations
Net interest income
Operating Profit Margin (%)
Provisions and contingencies
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Diluted Earnings per share*
After having witnessed a 1% decline in FY02, the bank's core interest income from advances fell sharply by 7%. Income from investments also grew in a single digit by 7% due to decline in yields over the last one year. On the other hand, the bank's fee based income rose at a comparatively better rate of 8%, forming 27% of total income (from 24% in 1QFY02). With increasing competition, it would be a challenging task for the bank to generate higher fee based income, considering its relatively small size and level of technology integration.
Interest on advances
Income from investments
Interest on balance with RBI
Higher operating expenses, on account of 49% increase in staff cost, pushed up the bank's cost to income ratio to 57% from 50% in 1QFY02. The bank's cost to income ratio is one of the highest in the banking sector. Staff cost of the bank increased, as the bank provided over Rs 90 m towards VRS write off in the June quarter. Vysya Bank launched VRS in February 2002 and has managed to reduce its employee strength by around 15%. The move to reduce the workforce was in line with ING's plan to reduce excess flab, ahead of its formal acquisition.
Among other developments, the bank's foreign partner, ING has been allowed by the FIPB (foreign investment promotion board) to raise its stake in the bank, provided the 49% sectoral cap on foreign direct investment (FDI) for the banking sector is not breached. ING group has already stepped up its holding in the bank to 44%, by acquiring 5% stake from IFC (International Finance Corp.). ING aims to increase the stake further to 49%.
At the current market price of Rs 276, Vysya Bank is trading at a P/E of 7x, 1QFY03 annualised earnings and Price/Book value ratio of 1.2x. The bank is geared well in terms of capital with capital adequacy ratio (CAR) of 11.4% as on 1QFY03. This will facilitate the bank's business expansion plans. The stock however, looks priced, compared to its peers considering its business growth, financial performance, regional nature and quality of assets.
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