PUBLIC SECTOR BANKS
LARGE BANKS (POST-2)
A REVIEW OF Q2 RESULTS DT 29.11.2010
Most of the Banks in Private and Public sectors fared well in Q2 FY2011. But, how did they fare on a comparative basis within their respective groups?
We reviewed (in Post.1) public sector Banks having Gross (total) Income of Rs.5000 cr and above in Q2 FY2011, which translates into a total annual income of Rs.20,000 Cr and above. We will now review the next lower three (3) Banks whose gross total income is less than Rs.5000 Cr but more than Rs.3000 Cr – which translates into an annual income of Rs.12,000 crores and above but less than Rs.20,000 Crores.
These 3 Banks are : Union Bank, Central Bank and oriental Bank of commerce, which are arranged in descending order of their quarterly incomes in the table below to facilitate easy comparison. Comparison of Central bank and Oriental Bank are both made with reference to the Union bank only, the biggest of them, below :
Interest on Advances : Union Bank has interest on advances of Rs.2776 cr. Central Bank has 3% less at Rs.2706 Cr. Oriental Bank has 26% less at Rs.2209 Cr.
Income on Investments : Union Bank has Rs.985 cr. Central Bank has Rs.919 Cr (7% less). Oriental Bank has 702 Cr less (40% less).
Total Interest Earned : Union Bank has Rs.3952 Cr. Central Bank has Rs.3644 Cr (8% less). Oriental Bank has Rs.2992 cr (32% less).
Total Income :
Union Bank has T.I of Rs.4462 cr.
Central Bank has T.I of Rs.3890 Cr -15% less total Income but 8% less Interest Income .
Oriental Bank has T.I of Rs.3206 Cr - 39% less total Income but 32% less Interest Income.
Interest Expended :
Union Bank has Rs.2416 Cr. Central Bank has Rs.2298 cr (5% less). Oriental Bank has Rs.1915 cr (26% less).
Net interest Income : (Interest Income – Interest expended):
Union Bank has Rs.1536 cr. Central Bank has Rs.1347 Cr (14% less). Oriental Bank has Rs.1077 Cr (43% less).
Operating Profit :
Union Bank has OPT of Rs.1131 cr,highest of the 3 Banks. Central Bank has Rs.778 Cr (45% less),being the Lowest. Oriental Bank has Rs.806 Cr (40% less).
Provisions :
Union Bank has Rs.599 cr. Its 5 Qtr provision history is : Rs.598.89 Cr; Rs.197.27Cr; Rs.340.02 Cr; Rs.161.09 Cr; Rs.134.98 Cr. Obviously, Union Bank had to make Huge provisions in Q2 FY11 only, while its past provisions were moderate. This may probably not recur in future.
Central Bank has Rs.240 Cr (149% less than UB). Its 5 Qtr provision history is : Rs.240.48 Cr; Rs.195.79 Cr; Rs.291.50 Cr; Rs.291.50 Cr; Rs.179.35 Cr – indicating almost similar level in last 5 Qtrs.
Oriental Bank has Rs.226 Cr (165% less than UB).Its provision History is : 226.31 CR (Q2) ; Rs.227.98 Cr (Q1); Rs.417.43 Cr (Q4 LY); 192.06 Cr (Q3 LY); Rs.55.14 Cr (Q2 LY); Its provisions are lowest in current qtr compared to UBI and CBI, and is on par with its previous provisions except high provisions in Q4 of last year.
Net Profit :
Union Bank has NPT of Rs.303 Cr which is lowest among the 3 banks, (though it had highest OPT) mainly because of higher provisions in Q2. Its NPT in last 5 Qtrs was : Rs.303.39 cr; Rs. 601.42 Cr; Rs.593.50 Cr ; Rs.534.13 Cr; Rs.505.10 Cr. The Lower Net profits in Q2 appears to be temporary. We need to watch Q3 to confirm this assumption.
Central Bank has Rs.379 Cr (20% more then UBI). Its last 5 qtrs had NPT of : Rs.379.38 Cr; Rs.336.81Cr; Rs.171.68 Cr; Rs.171.06 Cr; Rs. 306.44 Cr; We can see, it has an increasing trend of profitability.
Oriental Bank has Rs.398 Cr (24% more than UBI), highest of the three – mainly because of lower provisions.. Its last 5 qtrs had NPT of : Rs.397.65 cr; Rs.363.31 Cr; Rs.317.04Cr; Rs.289.43Cr; Rs.270.80Cr; As we can see, its profitability has been increasing at the fastest rate among the 3 banks.
Paid-up Equity :
Union Bank has Rs.505 Cr. Central Bank has Rs.404 Cr (25% less). Oriental Bank has Rs.251 Cr (102% less).
Capital Adequacy Ratio : Union Bank has CAR of 13. Central Bank has CAR of 11 . Oriental Bank has CAR of 11.
Basic EPS :
Union Bank has Rs.6.01. It has reduced EPS in Q2 FY11. Other Qrts had increasing NPT and increasing Qtrly EPS as follows: 6.01 (Q2); 11.91 (Q1); 11.75 (Q4 LY); 10.57 (Q3 LY); 10.00 (Q2 LY);Its EPS has come down in Q2, mainly because of higher provisions. So, we may watch Q3 results, to confirm if this is a one time affair or a trend.
Central Bank has EPS of Rs.8.70 ; During last 5 Qtrs - its Qtrly EPS was : 8.70 (Q2); 7.72 (Q1); 3.65 (Q4 LY); 3.85 (Q3 LY); 7.04(Q2 LY); The trend has been reasonable. Its provisioning has been consistent. Hence, its higher NPT can be attributed to higher business operations.
Oriental Bank has Rs.15.87. It has been improving its Qtrly EPS every qtr as : 15.87 (Q2) 14.50(Q1); 12.65(Q4 LY); 11.55(Q3 LY); 10.81(Q2 LY). Because of its consistent performance in the past, we can expect similar improving results in future as well.
% of Gross / Net NPA :
Union Bank has 1.18%. Last 5 Qtrs : 1.18 ; .94; .81; .58; .23; As we can see, there is an increasing trend in the % of Gross/net NPAs – which is a negative aspect for the bank. It is also quite high now.
Central Bank has 0.68%. Last 5 Qtrs : .68; .77; .69; .69; .74; It has a moderate percentage all through 5 qtrs.
Oriental Bank has 0.7%; Last 5 Qtrs : .70 ; .72; .87; .75; .66; This is quite steady in all 5 qtrs.
Return on Assets :
Union Bank is lowest at 0.64. Central Bank has 0.86. while Oriental Bank has the highest of 1.11. Oriental Bank has the highest return on Assts while Union bank has the lowest return on assets.
Public holding (%) :
Union Bank has 45%. Central Bank has very low % of 20%. Oriental Bank has 49%.
Current Market Prices :
Union Bank MP is Rs.349 ; Central Bank MP is Rs.184.00 ; Oriental Bank MP is Rs.435 ;
PE RATIOS :
UNION BANK : Current qtrly EPS is :Rs.6.01; Annualizing it ( x4), EPS comes to Rs.24.04. Current Market price is Rs.349. So, PE Ratio is : 14.52; Its latest Q2 performance has suffered owing to Higher Provisions. The PE Ratio looks high based on Q2. But Q1 EPS was Rs.11.91, based on that the PE ratio comes to 7.33 only. Its Q3 performance in this respect needs to be watched.
CENTRAL BANK : Current Qtrly EPS is :Rs.8.70; Annualizing it ( x4), EPS comes to Rs.34.80. Current Market price is Rs.184. So, PE Ratio is : 5.29; This is Low and capable of up-move in market price, once its current Bribery charges wear off on the market. It has been a consistent performer.
ORIENTAL BANK : Current Qtrly EPS is :Rs.15.87; Annualizing it ( x4), EPS comes to Rs.63.48. Current Market price is Rs.425. So, PE Ratio is :6.7 ; It has been a consistent performer. Oriental Bank has the highest momentum of growth and lowest equity and therefore, the highest EPS.
The market is unnecessarily giving too much credence to recent Bribery charges of a few individuals and driving down Banking and LICHF stocks. These operations of CBI and other agencies are carried out periodically in PSBs and PSUs – except that this time, it is on some high fliers. Their spill over effect on normal functioning of PSBs and PSUs is minimal and in fact usually results in a more improved performance and effective functioning from now on.
RESULTS TABLE :
| PSBS Q2 FY 11 | UNION BK | CENTRAL BK | Dif%1 | ORIENT BK | Dif%2 |
| Interest on Advances | 277579 | 270612 | 3 | 220908 | 26 |
| Income on Investments | 98512 | 91887 | 7 | 70207 | 40 |
| Interest on Balances With RBI | 5612 | 742 | 656 | 8073 | -30 |
| Others | 13521 | 1198 | 1029 | 5 | 270320 |
| Interest Earned | 395224 | 364439 | 8 | 299193 | 32 |
| Other Income | 50964 | 24545 | 108 | 21411 | 138 |
| Total Income | 446188 | 388984 | 15 | 320604 | 39 |
| Interest Expended | 241640 | 229762 | 5 | 191481 | 26 |
| Net interest Income | 153584 | 134677 | 14 | 107712 | 43 |
| Employees cost | 59194 | 53694 | 10 | 27642 | 114 |
| Other Operating Expenses | 32291 | 27741 | 16 | 20886 | 55 |
| Operating Expenses | 91485 | 81435 | 12 | 48528 | 89 |
| Total Exp E P A C | 333125 | 311197 | 7 | 240009 | 39 |
| Operating Profit | 113063 | 77787 | 45 | 80595 | 40 |
| Provisions | 59889 | 24048 | 149 | 22631 | 165 |
| P B T | 53174 | 53739 | -1 | 57964 | -8 |
| Tax Expense | 22835 | 15801 | 45 | 18199 | 25 |
| P A T | 30339 | 37938 | -20 | 39765 | -24 |
| Net Profit | 30339 | 37938 | -20 | 39765 | -24 |
| Face Value (in Rs.) | 10 | 10 | 0 | 10 | 0 |
| Paid-up Eq. | 50512 | 40414 | 25 | 25054 | 102 |
| Percentage Held by GOI | 55 | 80 | -31 | 51 | 8 |
| Capital Adequacy Ratio | 13 | 11 | 11 | ||
| Basic EPS | 6 | 9 | -31 | 16 | -62 |
| Gross/Net NPA | 146202 | 77635 | 88 | 60664 | 141 |
| % of Gross/Net NPA | 1 | 1 | 74 | 1 | 69 |
| Return on Assets | 1 | 1 | -26 | 1 | -42 |
| Public holding (%) | 45 | 20 | 125 | 49 | -9 |
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