X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
IDBI Bank: A stunner result but… - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Nov 13, 2001

    IDBI Bank: A stunner result but…

    IDBI Bank reported sparkling second quarter performance, led by a sharp rise in other income and interest margins. The bank's profits in first half of the fiscal year increased to Rs 330 m from Rs 18 m in the corresponding period of the previous year.

    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Interest Income 1,284 1,301 1.3% 2,537 2,496 -1.6%
    Other Income 85 226 167.2% 329 675 105.2%
    Interest Expenditure 1,139 860 -24.5% 2,148 1,768 -17.7%
    Operating Profit 145 441 204.1% 389 728 87.3%
    Operating profit margin (%) 11.3% 33.9%   15.3% 29.2%  
    Other Expenditure 235 318 35.3% 429 591 37.5%
    Profit before Tax -5 349   288 812 181.9%
    Provisions & contingencies 135 142 5.3% 270 302 11.6%
    Tax (39) 60   - 181  
    Profit after Tax/(Loss) (101) 147   18 330 1730.6%
    Net profit margin (%) -7.9% 11.3%   0.7% 13.2%  
    No. of Shares (eoy) 140.0 140.0   140.0 140.0  
    Diluted Earnings per share* -2.9 4.2   0.3 4.7  
    P/E (at current price)   5     4  
    *(annualised)            

    The bank's successful attempt in achieving a steep reduction in average cost of deposits to 8% in the current quarter (from 8.6% in the previous quarter) led to over 200% rise in operating profits. Its continuous focus on growing low cost retail deposits resulted in lower cost of funds. Retail deposits witnessed a YoY growth of 27% and formed 39% of total deposits.

    As part of its retail initiatives, IDBI Bank launched tele banking, Internet banking and mobile banking services. The bank currently has 100 ATMs and 64 branches, which it aims to expand to 350 and 100 respectively by FY02. The bank has 370,000 retail customers and it is adding 15,000 accounts every month. The rapid addition in number of clients is on the back of its 'Project Speed', which was launched in the beginning of second quarter. As per this project, bank accounts would be opened instantly along with services including phone banking, Internet banking, ATM card and a cheque book. Its other new launches include non-life insurance products (tie-up with Tata-AIG), loan against NSCs (tie-up with India Post), purchase of NSCs on Internet and installing ATMs at select India Post sites. These efforts are likely to increase the bank's retail reach considerably in the coming quarters.

    On the asset side too the growth was healthy. IDBI Bank's total customer assets witnessed a QoQ growth of 19% in 2QFY02. Primary driver for this growth was aggressive marketing of tailor made corporate asset products to top tier customers. 79% of its total assets and 92% of incremetal assets are now 'A' rated. To improve the credit quality further, the bank provided higher amount for loan losses in the first half. It has also shifted NPA classification and provisioning norms to 90 days, which will actually come into effect from FY04 (currently 180 days). Consequently, its NPA coverage ratio increased to 47% from 36% as on FY01. These efforts have also reduced the bank's net NPA to net customer asset ratio to 2.8% in the September quarter from 3.8% in the previous quarter. Retail assets however, forms just 5% of total assets with home loan accounting for about 60% of total retail assets. With the establishment of proper sales and service infrastructure, the retail asset growth is expected to get momentum in the second half of the current year.

    Apart from concentration on expanding core business income, the bank is also focusing on increasing its other income. During 1HFY02, the figure doubled due to a three fold increase in forex earnings. Non-fund based banking activity and money market trading income too contributed to this rise. Other income accounted for 21% to total income from 12% in 1HFY01. An aggressive focus on non fund based activities helped the bank in the first half to compensate for a decline in its core business income. However, an excessive reliance on this volatile stream of revenues could impact the bank's earnings in the coming quarters.

    At the current market price of Rs 19 IDBI Bank is trading at a P/E of 4x and Price/Book value ratio of 0.9x its 1HFY02 annualised earnings. IDBI Bank's parent has resulted in lower valuations for the bank, despite its relentless efforts in improving financial performance. IDBI holds 55% stake in the bank and aims to merge with it to become a universal bank. IDBI's financial health is much weaker than the bank. This would affect IDBI Bank's asset quality and consequently profitability if both the entities are merged. Amidst uncertainty of this merger the stock is lacking buying interest.

     

     

    Equitymaster requests your view! Post a comment on "IDBI Bank: A stunner result but…". Click here!

      
     

    More Views on News

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    Axis Bank: Outside Watchlist Slippages a Big Worry (Quarterly Results Update - Detailed)

    Jul 31, 2017

    Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.

    HDFC Bank: Asset Quality Deteriorates due to Farm Loan Waiver (Quarterly Results Update - Detailed)

    Jul 25, 2017

    Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.

    SBI: Merger Pushes up Bad Loans (Quarterly Results Update - Detailed)

    May 23, 2017

    State Bank of India (SBI) ended FY17 on a healthy note but concerns on bad loans from associate banks remain.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TRACK IDBI

    MARKET STATS