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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) FY98 FY99 FY00 CAGR
(3 years)
Operating income 3,991 4,914 6,464 27.3%
Other income 1,270 1,463 2,327 35.3%
Total revenues 5,261 6,377 8,791 29.3%
Interest expended 3,228 4,385 5,072 25.4%
Operating profit 763 529 1,392 35.1%
Provision & Contingencies 419 188 990 53.7%
Profit before tax 901 857 1,490 28.6%
Tax 100 149 404 101.0%
Profit after tax 801 709 1,086 16.4%
Number of shares 104 104 121  

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 FY98 FY99 FY00
Operating margin (excl. O.I.) 19.1% 10.8% 21.5%
Net profit margin 20.1% 14.4% 16.8%
Fully Diluted EPS 6.6 5.8 9.0
Capital Adequacy Ratio 10.3% 12.0% 13.7%
NPAs as a % to net assets 3.0% 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
Particulars Global Trust
Bank
HDFC
Bank
ICICI
Bank
UTI
Bank
Corporation
Bank
Market Price (Rs) 87 240 192 40 77
P/E (x) 9.7 40.5 35.9 10.4 4.0
Price/Book value (x) 2.0 7.8 3.3 2.2 0.8


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