• JUNE 14, 2002

Vysya Bank: Disappointing performance

Vysya Bank continued to report dismal performance with a marginal 3% rise in interest income and flat earnings for the fourth quarter. The bank's fee based income however, maintained its strong growth of over 100%.

(Rs m)4QFY014QFY02ChangeFY01FY02Change
Income from operations 2,203 2,278 3.4% 8,893 9,226 3.7%
Other Income 468 1,019 117.9% 1,239 2,813 127.2%
Interest expense 1,799 1,674 -7.0% 7,160 7,404 3.4%
Net interest income 404 604 49.4% 1,733 1,822 5.1%
Other expenses 498 979 96.4% 1,828 2,591 41.7%
Operating Profit (94) (375)297.7% (95) (769)707.7%
Operating Profit Margin (%)-4.3%-16.5% -1.1%-8.3% 
Provisions and contingencies 502 472-6.1% 657 1,10468.1%
Profit before Tax (129)172- 486 94093.3%
Tax (229)71- 101 253150.0%
Profit after Tax/(Loss)1001021.5%38568878.5%
Net profit margin (%)4.5%4.5% 4.3%7.5% 
No. of Shares (m) 22.6 22.6   22.6 22.6  
Diluted Earnings per share*17.718.0 17.030.4 
P/E Ratio 17.4  10.3 

Due to lower credit growth, the bank's interest income from core advances declined by 1% for the full year. The bank has however, targeted credit growth of 16% for FY03 which is in line with the industry growth rate projection given by the RBI. It also expected deposits growth of 25% for FY03.

During FY02, the bank recorded higher other income growth due to its strong treasury gains. The contribution of fee based income nearly doubled to 23% from 12% in the previous year. Taking advantage of the higher other income, the bank increased the amount for provisions on non-performing assets by 68% in FY02. Interest rates have stabilized at current levels and unlikely to decline further in the near term. Consequently, the bank is unlikely to record exponential rise in other income in FY03. In fact, it might decline, if the bank is holding long maturity portfolio, as the bank could have to make provision for losses in value of its portfolio due to decline in bond prices.

Income breakup
(Rs m)4QFY014QFY02ChangeFY01FY02Change
Interest on advances 1,138 1,094 -3.9% 4,563 4,497 -1.4%
Income from investments 820 1,002 22.3% 3,258 3,590 10.2%
Interest on balance with RBI 211 121 -42.9% 994 1,062 6.9%
Others 35 61 77.1% 79 76 -3.4%
Total 2,203 2,278 3.4% 8,893 9,226 3.7%

The bank's cost to income ratio for the year declined to 56% from 62% in the previous year. However, it still stands on the higher side. This is reflected from higher operating losses recorded by the bank in FY02. Vysya Bank's tax provision too increased substantially as it has provided for deferred tax liability (figures not given by the bank).

At the current market price of Rs 312, Vysya Bank is trading at a P/E of 10x, FY02 annualised earnings and Price/Book value ratio of 1.3x. The bank is geared well in terms of capital with capital adequacy ratio (CAR) of 12% as on March 2002. This will facilitate the bank's business expansion plans. The stock is attracting buying interest in expectation of Bank Brussels Lambert increasing its stake from the present 20%. The stock however, looks priced compared to its peers considering its business growth, financial performance, regional nature and quality of assets.

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