Oriental Bank: Good show - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Oriental Bank: Good show

Nov 5, 2001

Despite a sluggish economic environment, Oriental Bank of Commerce (OBC) has reported a double digit growth both in profits and interest income for the second quarter of the year. A sharp rise in operating margins aided the bank in reporting better than expected financial performance.

(Rs m)2QFY012QFY02Change
Interest Income 6,716 7,529 12.1%
Other Income 521 909 74.5%
Interest Expenditure 4,914 5,091 3.6%
Operating Profit (EBDIT) 1,802 2,438 35.3%
Operating Profit Margin (%)26.8%32.4% 
Other Expenditure 1,128 1,335 18.4%
Profit before Tax1,1952,01168.3%
Provisions & Contingencies 216 765 254.0%
Tax 227 390 71.8%
Profit after Tax/(Loss) 752 857 13.9%
Net profit margin (%)11.2%11.4% 
No. of Shares (eoy) 193 193  
Diluted Earnings per share*15.617.8 
P/E (at current price) 1.8 

During the quarter, most of the banks reported a better than expected growth in earnings led by a substantial growth in other income. Banks are now focusing on fee based income including brokerage, commission, forex and fees from cash management services to improve their total revenue base. The shift in focus to this revenue stream is due to the fact that they are less risky compared to traditional fund based lending. OBC's other income to total income ratio rose to 11% in 2QFY01 compared to 7% in 2QFY00.

Lower cost of funds pushed up the bank's operating margins to 32%, a rise of over 550 basis points. With this the bank's profits margins are now in line with one of the best in the sector. However, it will be a challenging task for the bank to sustain its margins at higher levels, in falling interest rate scenario.

A successful launch of VRS in the previous year helped the bank in reducing its cost to income ratio to 40% from 49% in 2QFY01. Out of the total VRS cost of Rs 901 m, the bank provided Rs 477 m in the previous year and the balance would be provided in the current year. A reduction in employee cost would improve the bank's cashflow in the coming years which could be deployed in expanding the business. A triple digit growth in provision figure, however, trimmed the earnings growth of the bank in the current quarter.

At the current market price of Rs 32, OBC is trading at a P/E of 2x FY02 projected earnings. Its price to book value ratio of 0.3x is amongst the lowest in the banking sector. During the quarter the bank raised Rs 2 bn Tier II capital in order to augment the capital adequacy ratio (CAR) for future expansion plan. As on March '01, the bank's CAR stood at 11.8%. If the bank continues to improve earnings quality with good growth in business volumes, it would be able to sustain double digit growth. However, its slow absorption of technology is likely to keep its valuations on the lower side.

Equitymaster requests your view! Post a comment on "Oriental Bank: Good show". Click here!


More Views on News

Union Bank of India Swings to Profit as Asset Quality Improves (Views On News)

Jun 8, 2021

Union Bank's share price up 2% post March quarter earnings.

PNB Reports Profit in March Quarter After Three-Way Amalgamation (Views On News)

Jun 8, 2021

Shares of PNB fell over 2% yesterday despite healthy quarterly results.

Bank of Baroda Shares Plunge 5% After Reporting Huge Loss (Views On News)

May 31, 2021

The stock fell after the bank posted a loss due to higher tax expenses.

India's Largest Bank, SBI Posts Record Profit in Q4 (Views On News)

May 22, 2021

All you need to know about the bank's latest financial results.

How Did Canara Bank Perform in Q4FY21? (Views On News)

May 19, 2021

Key takeaways from Canara Bank Q4FY21 results.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Mar 20, 2020 (Close)


  • Track your investment in ORIENTAL BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks