Nov 15, 2001|
BoP: Subdued performance
Bank of Punjab (BoP), a new private sector bank's financials have taken a severe hit in the second quarter of the current fiscal. A sharp rise in operating expenses and a fall in interest margins have resulted in 65% drop in the bank's net profits in 2QFY02.
|Operating profit margin (%)
|Profit before Tax
|Provisions & contingencies
|Profit after Tax/(Loss)
|Net profit margin (%)
|No. of Shares (eoy)
|Diluted Earnings per share*
|P/E (at current price)
Although, the bank's core business income witnessed a double digit growth, a stiff pressure on interest margins led to a 19% drop in operating profits. While most private sector banks managed to trim a sharp fall in interest margins, BoP's operating margins declined by 950 basis points. With the innovative service offerings by top 3 new private sector banks, BoP is finding tough to reduce cost of deposits.
During the quarter, the bank's cost to income ratio rose to 69% from 49% in 2QFY01. This negated a triple digit growth in other income figure. The contribution of other income to total income increased to 15% in the current quarter from 3% in the corresponding quarter of the previous year. Private sector banks are exploring the opportunities in forex and non fund based business to improve total income. These stream of revenues are also considered less risky compared to fund based activity.
At the current market price of Rs 12 BoP is trading at Price/Book value ratio of 0.8x and P/E of 17x 2QFY02 annualised earnings. The bank has the track record of declaring dividend above 10% in the last four years. However, considering the financial performance in the current year, it may not be able to maintain the dividend ratio. This makes the stock unattractive even on the basis of dividend yield.
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