|Corporate News||Monday, 6 March, 2000|
After a poor show in 9903, private sector banks have unveiled a heart-warming Q3 9912 perfomance
Twenty private sector banks reported a 127% rise in net profit on a 28% growth in income in Q3 ended Dec.99. The performance for Q3 has lifted the overall nine month growth rates.
Slower rise in interest expenses for Q3 99 (21%) and for nine months ended 31 Dec.99 (22%) the as compared to 33% for F.Y 9903 has helped private sector banks to record improved bottom line figures. Net profit for the nine-month period at Rs 720 cr surpassed the net profit earned for the whole of FY 9903 (Rs 591cr ) by 22%. In fact, the net profit for Q399 at Rs 265 cr was 44% of the net profit, earned for the whole of last year (Rs 591cr).
Operating profit margins (PBIDTM) for the nine months has shown improvement at 70.1%, from 68.9% for FY 9903. Increased fee-based income and better control over operating expenses have contributed to this rise. Fee-based income has risen for the majority of banks as a majority of banks now offer services like marketing of mutual funds, credit cards and depository services.
Depreciation is up 28% for Q3 compared to a growth of 50% in FY 9903.For the nine month period depreciation growth is just 14%. Taxes grew 5%in Q3 and 3% for the nine month period as compared to a fall of 17% for FY 9903.
This has contributed to a 96% rise in the profit before tax in Q3 compared to a 14% fall in FY 9903. Net profit, as mentioned earlier, has jumped a massive 127% for Q3 99 and 50% for the nine month period as against a fall of 13% for F.Y 9903
Among the new generation private sector banks, Idbi Bank showed an over 100% growth in net profit for both the quarter and nine-month period ended Dec.99. ICICI Bank showed a 100% growth in net profit for Q3 99. HDFC Bank showed a growth of 55% and 35% in net profit for Q3 and the nine-month period respectively. Times Bank, which announced its merger with HDFC Bank, showed growth rates of 30% and 50% in its net profit.
Centurion Bank announced impressive growth in bottom line figures, however these included the merged figures with the erstwhile Twentieth Century Finance Corp and hence are not strictly comparable with previous years figures.
Global Trust Bank was another bank which doled out promising results. Net profits grew at 51% and 46% for the Q3 and the nine month period.
The last quarter has seen a re-rating of new generation private sector banks on the stock markets. The merger of HDFC Bank with Times Bank has set the trend for future merger amongst banks in the industry. ICICI Bank, Centurion Bank and UTI Bank were the other banks which were reported to be in merger talks in Jan. 2000. The last two months, besides mergers, saw a lot of products being launched by the leading private sector banks. HDFC Bank and ICICI Bank launched a series of products based on Internet interface. Mobile banking, Internet credit cards, payment gateway, investment advisory services and on-line Internet trading on the stock markets being some of them. With the thrust now on e-commerce and use of Internet for banking, substantial saving in cost is expected in the coming years. Banks now want to be seen as providing all financial services and not just confine to the business of accepting deposits and lending. With the insurance sector now being opened up, bank branches will become the ideal platform for marketing of insurance products doled out by insurance companies.
The banking stocks in the private sector have outperformed the BSE index in the last month. The share prices of a majority of the private sector banks have nearly doubled from their prices in early Jan.2000. Encouraging revival signals on the economic front, expectations of a favoura-ble budget for the banking sector and e-commerce initiatives have kept the banking sector stocks ticking.Top
ICICI Bank has reported excellent results for the quarter ended Dec.99. Net profit of the bank doubled to Rs 28.26 cr from Rs 14.04 cr. For the nine-month period ended 31 Dec.99, the net profit at Rs 72.36 cr was 64% higher. The profits for Q199 was at Rs 20.25 cr, for Q299 at Rs 23.85 cr and Q399 at Rs 28.26 cr have shown a growth of 17% and 22%.
The bank has succeeded in maintaining its operating profit margins at 88.95% for the quarter ended Dec.99 even on higher interest income, which speaks about the ability of the management to maintain growth without sacrificing margins. The OPM for the nine-month period ended Dec.99 and the year ended Mar.99 was 89.74%. Robust growth in other income at 88% helped to maintain margins for the quarter ended Dec.99. Expenditure for the quarter rose 67%.
Interest income for the quarter was up by 43% to Rs 205 cr from Rs 143 cr. Interest expenditure kept pace with interest income which also rose 43% to Rs 164.7 cr from Rs 115 cr.
Provisions and contingencies at 50% of the profits before tax were lower by 12 basis points as compared to the preceding quarter of the previous year. The ratio of provision and contingencies to the profit before tax for the period ended 31 Dec.99 was 44% as compared to 51% for the previous period. Significant reduction has taken place in the net non-performing assets which is down from 1.8% as on 31 Mar.99 to 1.00% during the nine-month period ended Dec.99. The reduction comes about when the advances of the bank have increased 51% from Rs 2,680 cr to Rs 4,056 cr, thus continuing as the largest among the new private sector banks.
ICICI Bank, having pioneered the Internet banking concept, has now to its credit 24,000 Internet accounts registering a growth of 600%. It has also launched a quick remittance product called Money 2India. A memorandum of understanding with Satyam Infoway for the distribution of retails products of the bank on-line was signed. The E-broking venture of the ICICI group which aims to integrate customers demat accounts, savings account and banks account should contribute to the growth momentum.
The results were much better than market expectations, The scrip, which has been in the news for its reported talks with Centurion Bank, has seen a lot of action on the bourses attracting significant volumes in the range of 5-7 lakh. After the results were announced the scrip closed the day at Rs 91.25, hitting the upper circuit limit. After the company announced its plan for an ADR issue of US $ 125 mln for aquisitions and to boost tier 1 capital, the scrip touched a high of Rs 188, translating into a PE of 29.
HDFC Bank has reported a 55% jump in the bottom line at Rs 28.17 cr for Q3 9912, up from Rs 18.19 cr for Q3 9812. The rise in Q3 net profit is mainly driven by rising interest income which grew 61%. Other operating income grew 55.5%. Profit for Q3 at Rs 28.17 cr is almost the same as for the previous quarter ended Jun.99 at Rs 28 cr.
Operating profit margin for Q3 99 was 74.9%, down from 83%from the corresponding quarter of the previous year. The margins for the nine-month period ended Dec.99 at 79% are also down from 81.5%. Though the interest income is rising, margins are under considerable pressure as the bank fights competition to grow and get more business.
Increased competition could have been one of the prime reasons for the bank to look for mergers to reduce competition and spur inorganic growth.
Interest expenditure for Q3 9912, at Rs 91 cr, grew 44%. For the nine-month period ended Dec.99, interest expenses grew 61% and were at Rs 251.01 cr. The lower growth in interest expenses at 44% for the quarter could not be used by the bank to improve its bottom line significantly as most of the gains were lost due to lower margins. Depreciation at Rs 7.94 cr was higher by 155% from the corresponding period of the previous year. Depreciation for the nine-month period at Rs 18.14 cr also showed a rising trend at 80%.Rising depreciation indicates that the bank has increased its investment in depreciable assets. One can expect cash flows from such investments in the periods ahead .
One of the significant features of the Q399 results has been its provisions for taxes. At Rs 18.88 cr, they absorb about 40% of the pre-tax profits. The ratio for the nine-month period is 32%, indicating a lower provision in the earlier periods. A ratio of 40% can be expected in the last quarter of FY 1999-2000.
In Dec.99, HDFC Bank announced its takeover of Times Bank. The merger, approved by the shareholders, will make the bank the largest private sector bank in India. This has also signalled the likely action to be seen in the financial and banking sector in the coming months. According to Aditya Puri, the merger has gained the bank two years in time, increased geography and depositor base. The bank has introduced mobile banking in association with Max Touch in Mumbai city, the first of its kind in India. It is also expected to offer debit cards introduced by Times Bank once the merger goes through.
The scrip, listed in the A group of the Bombay Stock Exchange, is the market leader in banking stocks. The scrip touched an all-time high of Rs 262. It started its spectacular rise in Nov.99 and spurted from levels of Rs 140 once the merger was announced hitting the 8% limit on its way up. The reduction in the interest rates on PPF and small savings schemes of the Central government will improve the deposit base. A corresponding cut in the PLR will spur credit offtake. The bank has tied up with Sesami.com PTE, the e-commerce arm of Singapore Telecom (Singtel) for offering e-commerce, mainly targeted at its corporate clientele.
The bank has also picked up a 50% stake jointly with HDFC in the Chennai-based Net Savvy Solutions. Net Savvy is promoted by the California-based solution provider Net International, a Nasdaq-listed company. Enet, an on-line electronic banking product, is to be launched. It will allow corporates to access their accounts over the Internet
In tune with the times
Times Banks Q3 9912 income and net profit have grown by 30% over the corresponding period of the previous year. The growth has come mainly from increase in interest income from Rs 72.57 cr to Rs 94.59 cr, registering a growth of 23%. Other income (from non-fund business activities) grew from Rs 10.63 cr to Rs 13.63 cr, registering a growth of 22% .
OPM for Q3 was 79.7%, down from 83.2% for the corresponding quarter of the previous year. The fall in margins can be contributed to higher other expenditure which rose by 54%, and increase in provisions and contingencies which rose by over 100% over the corresponding previous quarter.
Interest charges were up to Rs 72.17 cr from Rs 60.47 cr, showing a increase of 19%.The bank has managed to increase its interest income at a high rate of 30% which has contributed to the rise in net margin. Depreciation was Rs 2.02 cr as against Rs 1.73 cr for Q3 9812. It is up by 17%.
Tax at Rs 3.72 cr, up from Rs 65 cr, has shown a rise of more than 450% as compared to the corresponding period of the previous year. The tax for the nine-month period ended Dec.99 at Rs 10.58 cr was higher by a whopping 683% compared to the nine months ended Dec.98. For the quarter ended Dec.99, the bank provided 30% of its profit for taxation when compared to 9% for Q3 9812, and 6.7% and 27.5% for the nine-month period ended Dec.98 and Dec.99 respectively. The bank has consistently increased its ratio of taxes to profit before tax from 6% to around 30%.
Times Bank was in the news recently when it announced its merger with HDFC Bank, making it the largest private sector bank in the country. The merger approved by the shareholders will come into effect from Feb. 2000. 5.75 shares of Times Bank are to be exchanged for every share of HDFC Bank. The bank also announced the launch of its debit card and the opening of a millennium centre in Mumbai.
The bank has reduced its NPA levels to around 2.34%for the period ended Dec.99 from 3.1% for the year ended 9903.
Merger pushes up net profit by 259%
Centurion Bank has reported a 259% jump in Q3 9912 net profit as against Q3 9812. The increase was a result of higher interest income for the quarter which rose 161%. Income from non-fund based activities rose 221% as against Q3 in the previous year. The growth is mainly attributed to the merger of Centurion Bank with 20th Century Finance Corporation. For the nine-month period ended Dec.99, net profit grew 37% and was at Rs 16.50 cr as against Rs 12.03 cr for the nine-month period ended Dec.98. The interest income for the nine-month period ended Dec.99 was up 114%. Interest expenditure was up 113% which indicates that growth has come only in the quarter ended Dec.99.
OPM for Q3 9912 was 88% as against 86.67% in the corresponding period of the previous year. The two figures, are not strictly comparable mainly because the results for this quarter include the income from the business of 20th Century Finance Corporation and the areas of operation of both the concerns were different, each having its unique characteristic. Interest expenditure was higher at Rs 94.10 cr for Q3 99 from Rs 37.29 cr for Q3 98, showing a jump of 150%.Overall, interest cost is expected to come down as the old high cost deposits of the finance company are paid off .The spreads will also align with the industry norms. Depreciation at Rs 11.27 cr was up 183% from Rs 3.97 cr. The increase was due to provisions on assets of 20th Century Finance Corporation.
Taxes including provisions absorbed Rs 6.72 cr for Q3 9912, up a staggering 2140% from Rs 0.30 cr in Q3 9812.This includes a provision of 0.25% for standard assets as per Reserve Bank of India guidelines. Taxes and provisions have absorbed 42.67% of profit before taxation as against 10% for Q3 9812 and 30% for the nine-month period ended Dec.98.
Centurion Bank is listed on BSE and has an average daily volume of 1 lakh shares. After the merger of Times Bank with HDFC Bank in late Nov.99, the general interest in bank scrips saw the share price soar to Rs 28 with rising volumes on BSE. Since then, the scrip is showing a downward trend.
GLOBAL TRUST BANK
Bride in waiting
Global Trust Bank has recorded good growth rates in total income and net profits for the quarter ended Dec.99. Total income has shown a growth of 26% while net profit has risen by 51% over the corresponding previous quarter. Rise in interest income by 21% and other income by 45% has contributed to the overall rise of 26%.
For the nine-month period ended Dec.99, the total income growth has been 25% to Rs 570.31 or while net profits grew by 46% to Rs 73.29 cr as against the corresponding previous period. The trend of a higher growth rate of other income as compared to interest income is also seen for the nine-month period ended Dec.99. Growth rates of interest income and other income for this period were 20% and 45%. OPM which was at 85.1% fell marginally to 84.9% for the nine-month period. It, however, improved to 85.3% for the quarter ended Dec.99.
In absolute terms, interest expenses have gone up from Rs 110.42 cr to 120.88 cr for the quarter ended Dec.99, representing a rise of a mere 9%. For the nine-month period, interest at Rs 362.47 cr was 12% higher than the Rs 324.78 cr for the corresponding period of the previous year. Interest expenses as a percentage of total income were 68% for the year ended Mar.99. This ratio fell to 63% for the nine-month period ended Dec.99 and further fell to 60% for the quarter ended Dec.99.
The bank has managed to control its interest expenditure much more efficiently resulting in a better gross and net profit for this period.
Provision for contingencies and tax at Rs 19.63 cr for the quarter ended Dec.99 and at Rs 48.73 cr for the nine-month period ended Dec.99 are higher by around 3 times the figures for the corresponding previous period. Had it not been for the higher provisioning, the net profit figures for both the periods would have been much higher. Provisions and tax absorbed 8.5% of total income for the nine-month period. They absorbed 9.9% of total income for the quarter ended Dec.99 and just 5.3% for the full year ended Mar.99.
There has been good growth in deposits, advances and net worth for the nine-month period ended Dec.99. While deposits and net worth have grown by around 25%, advances grew just under 22%.
The scrip is listed in the B group of Mumbai Stock Exchange and is very actively traded. With banks offering Internet and e-commerce banking, the outlook for the sector has changed.
The stock touched an all-time high of Rs 110 on volumes of over 8 lakh shares on NSE with 4130 trades on 3 Feb. 2000.
The scrip has attracted a lot of interest this month with volumes ranging between 2-4 lakh on the news that it is looking for a strategic foreign partner with a strong technological edge and will offer a 15% stake. At present, International Finance Corp. (IFC), the private sector funding arm of the World Bank, holds nearly 10%. Asian Development Bank (ADB) holds another 9.88%. A tie-up will give the bank the boost it has been waiting for.
A moderate Q3 9912 performance
UTI Bank has posted a moderate rise in net profit of 21% at Rs 9.87cr for Q3 9912. Total income for the period has, however, shown a better growth at 25% to Rs 130.33 cr as compared to the corresponding previous quarter. Better growth rate in interest income of 27% for the quarter has helped sustain the rise in total income. Other income has recorded a rise of only 12% for the last quarter. The net profit is distinctly lower as compared to profits for Q1 9906 and Q2 9909 at Rs 17.16 cr and Rs 20.95 cr respectively.
For the nine-month period ended 31 Dec.99, total income grew by 30%, on the back of a 54% growth in other income and 27% growth in interest income. Growth in other income has been stronger for the nine-month period than for the last quarter of 1999, indicating a poor growth in the last quarter.
The operating margin has been steady at 90.2% for the full year, 90.2% for the nine months and 90.4% for the three months ended Dec.99. The cost income ratio which stood at 44.31% as on Dec.98 improved to 43.05% at the end of Dec.99 reflecting a slight increase in margin.
Interest expenses for Q3 9912 at Rs 92.51cr is up 33% over the corresponding previous period. For the nine-month period, interest expenses grew 30% from Rs 214.19 cr to Rs 279.11 cr. Growth in interest income for the nine-month period has kept pace with interest expenses at 30% to Rs 385.69 cr. For Q3 9912 interest income grew 25%, while the growth rate of interest expenses was 33% for the period .
Provisions and contingencies for Q3 9912 fell by 11% at Rs 12.72 cr from Rs 14.23 cr for the corresponding quarter of the previous year. For the nine months ended 31 Dec.99, provisions and contingencies at Rs 37.06 cr were 24% higher than the corresponding previous period. The ratio of contingencies to total income as on 31 Mar.99 was 8.85%. This ratio is much lower than 13.7% for Q3 9812 and 10% for the nine-month period ended 31 Dec.98. The bank reduced provisions from 13% of total income for Q3 9812 to 8.8% of total income as on 31 Mar. 99.
For Q3 9912 and the nine-month period ended 31 Dec.99, this ratio was 9.7% and 9.6% respectively, indicating that the bank has now stabilised this ratio at around 9.5% of total income.
UTI Banks deposits are 33% higher at Rs 3,593.68 cr as on 31 Dec.99 as against Rs 2,708 cr as on 31 Dec.98. Advances during the same period grew by 30% from Rs 1,918.34 cr to Rs 2,489.37 cr. The share price has an upward trend and is riding on the renewed interest for private sector banking company stocks. The scrip touched an all-time high of Rs 45. UTI Bank was reported to have shown interest in merging with Centurion Bank, another private sector bank. The merger, if it goes through, will make it the third largest private sector bank in the country in terms of size and market cap after HDFC / Times Bank and ICCI Bank, and it will enjoy a distinct advantage over Global Trust Bank and IDBI Bank.