Treasury Gains

Updated: Jul 31 2003, 05:30am hrs
Bank of India (BoI), the first Indian bank to launch a branch outside the country (in London), has posted a marginal rise in total interest earned by two per cent to Rs 1,438 crore during the quarter to June 2003. The growth rate is lower than that of SBIs 3.3 per cent during the same period.

BoIs interest on advances declined by four per cent to Rs 838 crore. The decline is despite increase in domestic advances by 6.5 per cent to Rs 31,748 crore and growth in foreign advances by 7.6 per cent to Rs 11,425 crore. This can be attributed to a substantial fall in lending rates. Interest on balances with RBI and other interbank funds was up by 42.7 per cent at Rs 86 crore. Other interest income also soared to Rs 35 crore (Rs 0.13 crore). Total interest expense for the bank has fallen four per cent leading to a growth in net interest earned to Rs 534 crore. Net interest margin (NIM) has improved to 2.79 per cent (2.65 per cent) due to judicious raising and deployment of funds.

Other income has shown a significant growth of 17 per cent to Rs 334 crore in line with the trend in the banking sector. Among operating expenses, payments to and provisions for employees is major component at Rs 290 crore (Rs 34 crore towards prorata amortisation of VRS expenditure), while other expenses have grown 28 per cent to Rs 125 crore. Operating profit went up by 19 per cent to Rs 453 crore.

Provisions and contingencies have gone up 14 per cent to Rs 162 crore of which those for NPAs amount to Rs 137 crore. The gross NPA ratio and net NPA ratio have increased to 9.13 per cent (9.07 per cent) and 5.79 per cent (5.4 per cent) respectively.

An improvement in NIM and growth in other income boosted PBT by 22.5 per cent to Rs 290.7 crore. However, PAT grew by only 15.1 per cent to Rs 204 crore due to a jump in provision for tax to Rs 86.7 crore (Rs 60.1 crore).

Treasury operations account for 44 per cent of the revenue and 54 per cent of profit, while the other banking operations contribute the rest. The assets of the bank worth Rs 76,418 crore (excluding unallocated) are divided into 40.1 per cent in treasury and 58.6 per cent in other banking operations. The capital adequacy ratio of BoI has improved from 10.45 per cent to 12.73 per cent.

Merck Limited
Merck Limiteds net sales remained unchanged at Rs 96.5 crore (Rs 96 crore) during the quarter to June 2003. Even then net profit jumped by 52 per cent at Rs 13.4 crore. This is because of restructuring Merck took up. Costs declined. Staff cost did so by 29 per cent at Rs 10.5 crore mainly on account of extensive VRS to employees of Taloja plant. Other expenses also declined substantially by 20 per cent to Rs 15.5 crore. Consequently, operating profit went up by 37 per cent to Rs 23.2 crore. Yet Merck continues to suffer from its heavy dependence on vitamins that have seen a contraction of late. Slow expansion in other therapy areas, low research and development and lack of new introductions from its parents product pipeline have also added to its problems.

Mercks operations are broadly classified into two segments - pharmaceuticals and chemicals. Pharmaceuticals predominantly consists of vitamin formulations, cardiovascular drugs, dermatologicals, hematinics, neurologicals, antibiotics etc. Pharmaceuticals sales, up five per cent, contribute 65 per cent to total sales. Pharmaceuticals also contribute bulk of profit before tax that increased by 67 per cent.The chemicals segment consists of three strategic business units: analytics and reagents, life science products and pigments. Sales of this division declined by six per cent and contributed 35 per cent to total sales.

Merck is the largest manufacturer of vitamin E in the country and has been facing severe competition from cheap imports from China. Merck received some relief after the government imposed anti-dumping duty on import of vitamin E from China, besides providing interim relief to the company against the import.

Atul Sathe & Dhruv Rathi