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Global Trust Bank Growing fast

Sep 12, 2000

Banking sector in India is changing drastically in terms of technology adoption. The credit offtake by scheduled and commercial banks in India is increasing. Global Trust Bank (GTB) is one of the private sector banks, which is growing considerably with its tech- savvy plans, lower NPAs and efficient management. Interest income of GTB for FY00 increased by more than 31%, while the non interest income increased by more than 59% during the previous year, revealing the banks strength in treasury, capital market and other related services. The net profit after tax increased to Rs.1.1 bn, a growth of 53.29% despite conservative policy of provisioning for taxes and assets. The growth is attributed to the increase in low cost deposits, decrease in the cost of funds and taking advantage of market opportunities in financial markets.

Financial Performance
(Rs m)FY98FY99FY00CAGR
(3 years)
Operating income3,9914,9146,46427.3%
Other income1,2701,4632,32735.3%
Total revenues5,2616,3778,79129.3%
Interest expended3,2284,3855,07225.4%
Operating profit7635291,39235.1%
Provision & Contingencies41918899053.7%
Profit before tax9018571,49028.6%
Tax100149404101.0%
Profit after tax8017091,08616.4%
Number of shares104104121 

The business drivers of the bank in future would be its thrust on retail banking, investment banking and e-commerce initiatives. Its retail banking thrust has enabled the bank to grow its deposits at the CAGR of more than 63% in last three years. GTB is one of the clearing banks for both BSE and NSE, with more than 40% of settlement volume handled by it. It is among the few banks, which are way ahead in terms of effective technology implementation. The bank has recently started Internet banking and depository services on the Internet. Payment gateway for e-commerce is on the anvil. The bank has also announced tie up with Tata Cellular to launch mobile banking facilities in near future.

Key Ratios
Particulars FY98FY99FY00
Operating margin (excl. O.I.)19.1%10.8%21.5%
Net profit margin20.1%14.4%16.8%
Fully Diluted EPS6.65.89.0
Capital Adequacy Ratio10.3%12.0%13.7%
NPAs as a % to net assets3.0%2.2%0.9%

Apart from the above initiative, the bank is planning to launch several new products such as credit and debit cards, besides products in banking and housing finance. It has also planned to distribute mutual fund products in the next two-three months.

At the current market price of Rs 87, GTB is available at P/E of 9.7 times its FY00 earnings with a Price/Book value ratio of 2 times. The valuations of the bank however are comparatively lower than that of HDFC Bank and ICICI Bank. Focus on technology has enabled the bank to provide better client service and thus faster growth. It has also done well in terms of all performance parameters.

Comparative Valuations
ParticularsGlobal Trust
Bank
HDFC
Bank
ICICI
Bank
UTI
Bank
Corporation
Bank
Market Price (Rs)872401924077
P/E (x)9.740.535.910.44.0
Price/Book value (x)2.07.83.32.20.8

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