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Global Trust Bank – Analyst meet update

Nov 8, 2000

Global Trust Bank (GTB)’s operating profit margins improved considerably for the second quarter ended September 2000. The bank’s profit growth was led by low cost of deposits yielding higher interest spread. The profit growth of GTB was however marred by higher other expenses. Investment by the bank in setting up infrastructure (ATMs and branches) and e-initiatives led to increase in other expenses. At present the bank has network of 76 branches and 52 ATMs. It has invested around Rs 600 m in technology improvement and plans to invest Rs 300 m more during the current year. The bank will expand its distribution network through opening up 21 branches and 25 ATMs. The bank’s go slow strategy on opening ATMs has paid it rich dividend through lower cost of installment (ATM cost has fallen by more than 65% from Rs 2.5 m initially).

(Rs m) 2QFY00 2QFY01 Change
Operating Income 1,422 2,125 49.4%
Other Income 482 157 -67.4%
Operating Profit (EBDIT) 235 500 112.7%
Other expenses 185 246 33.1%
Depreciation 110 110 0.3%
Profit before Tax 423 302 -28.6%
Other provisions 102 -39  
Tax 78 26 -66.3%
Profit after Tax/(Loss) 243 314 29.4%
Operating Profit Margin (%) 16.5% 23.5%  
Net profit margin (%) 17.1% 14.8%  
Diluted Earnings per share* 8.0 10.4  

The bank has classified its investment portfolio according to RBI guidelines and, accordingly provision for depreciation in the value of investments has declined. During the quarter investment income formed 35% of its total operating income. The bank has invested around 11% of its total investments into equity shares and mutual funds. The volatile stream of revenues could adversely affect is future profit growth. During the quarter GTB has successfully improved its capital adequacy ratio (CAR), non-performing assets (NPA) ratio and interest spread.

Key Ratios
Particulars 2QFY00 2QFY01
ROANW * 29.8% 29.4%
CAR 9.5% 14.1%
Credit/Deposit ratio 54.5% 50.4%
Net NPAs 2.0% 1.4%
Interest Spread 6.1% 7.0%
* Returns on Average Net Worth

At the current market price of Rs 91 GTB is trading at a P/E multiple of 9 times its 2QFY01 annualised earnings with a Price/Book value ratio of 1.8 times. Future growth driver for the bank would be its initiatives in organization restructuring, better risk management system and operating efficiencies.

Productivity Indicators
(Rs m) 2QFY00 2QFY01
Business per branch 1,130.0 1,010.0
Business per employee 91.1 100.3
Profit per employee 1.2 1.4

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