Wednesday, April 21, 2010

Commercial banks' profit margin shrinks

The commercial banks have been facing rough weather.
The key indicators -- Profit margin, earning per share (EPS) and Return on Equity (RoE) -- to guage the performance of the listed commercial banks have slowded down.
"With the increasing number, the profit margin of the commercial banks witnesed a slowdown in the last fiscal year," according to a reserch on the sector-wise average by Securities Research Center and Services Pvt Ltd (SRCS).
In the year 2007-08, the average profit margin of the 23 listed commercial banks was 27.09 per cent but in 2007-08, it posted only 27.86 per cent.
"Cut-throat competition among the rising number of commercial banks and lack of market expansion have pulled their profit margin down," said market analyst Rabindra Bhattarai.
Currently there are 27 commercial banks in operation and some four are in pipeline making it hard to increase the profit margin.
The average profit margin was 18.32 per cent in 2004-05 when there were only 17 listed commercial banks.
Similarly, the earning per share (EPS) has also slowed down, as the market is flooded with rights and bonus shares. In 2007-08, an average EPS of the listed 23 commercial banks was Rs 35.36 but it increased to only Rs 36.74 in 2008-09. EPS is generally considered to be the single most important variable in determining a share's price.
One of the most important profitability metrics Return on Equity (RoE) has declined. The average RoE of the listed 23 commercial banks stood at 24.73 per cent in 2008-09 against the 2007-08's average of 25.22 per cent. RoE reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet.
Due to increasing rights and bonus shares Networth Per Share (NWPS) has also slowed down. In the year, 2006-07 an average NWPS -- a measurement of the net worth of the company for each share of stock that has been issued -- of 18 listed commercial banks was Rs 141.56 which went down in the fiscal year 2007-08 to Rs 140.21 as the listed commercial banks increased to 23. In 2008-09, it posted Rs 153.88.
However, the sector can heave a sigh of relief on non-performing assets (NPA), price-earning (P/E) ratio and return on assets (RoA) — the other key indicators. The average NPA was 1.98 per cent in 2008-09 against a year ago's 3.58 per cent. NPA -- an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions relating to asset classification issued by the central bank -- has to go down.
During the fiscal year 2007-08, the overspeculation of the investors in the secondary market have raised the shares of commercial banks' P/E ratio to an average of 65.60 times that came down to an average of 56.28 times in 2008-09.
In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself.
The average RoA has, however, almost doubled in 2008-09 to 2.21 per cent from 1.76 per cent a year ago. RoA -- an indicator of how profitable a company is relative to its total assets -- gives an idea as to how efficient management is at using its assets to generate earnings.

14 comments:

Anonymous said...

I would like to more know about it. asthma Read a useful article about tramadol tramadol

Anonymous said...

You wrote a very interesting article. And I agree with you. hair loss Read a useful article about tramadol tramadol

Anonymous said...

What's up, I desire to subscribe for this blog to take most recent updates, so where can i do it please help out.

Take a look at my web blog; Raspberry Ketones

Anonymous said...

That is very fascinating, You are an excessively skilled blogger.
I've joined your rss feed and stay up for in the hunt for extra of your fantastic post. Also, I've shared
your site in my social networks

Here is my site: misspelled ebay

Anonymous said...

I used tο be suggested thіs web site through my cousin.

I am no lοnger сertain whether this put up is wгitten bу means of him as no оne else
realize such taгgetеԁ аbout
my difficulty. You are amаzing! Thank you!

My webpage - cheap luxury fragrances

Anonymous said...

Greetings, I thіnk your wеbѕite
may be haνing browser compatіbility prоblemѕ.
Wheneѵеr I loοk at your web sіte in Safarі, it lοoks
fine howevеr, if opening in Inteгnеt Εxplοrer, it's got some overlapping issues. I merely wanted to give you a quick heads up! Other than that, great blog!

Also visit my blog :: best cheap perfumes ()

Anonymous said...

Howdy! Do you know if thеу makе anу plugins to aѕsist with
Seагch Εngіnе Optimіzаtіon?

I'm trying to get my blog to rank for some targeted keywords but I'm not sееing
ѵery good resultѕ. If уou know of
any please shаre. Thanκ уοu!


Heгe iѕ my blog ... Treρpenaufzug ()

Anonymous said...

Toԁaу, I wеnt to thе beаchfront with my children.
I found a sea shell anԁ gаve it tο
my 4 year old daughteг and saіd "You can hear the ocean if you put this to your ear." Ѕhe ρut the shell to her eaг and sсreamеd.
There was a hermit crab inѕіde and it pinchеd her
eаr. Ѕhe never wants to go back!
LoL Ӏ knοω this is completely
off topiс but I had to tеll ѕоmeоne!



Here is my page ... cheap fishingboat auction online

Anonymous said...

My family members eveгy time ѕaу that
I am ωаsting mу time heгe
аt web, except I κnow I am getting fаmіliarity ԁaily by reaԁing such niсe
contеnt.

Fеel free to visit my wеblog :: buy bеѕt chеap watches onlinе ()

Anonymous said...

Hі! I know thіs is kinda off tоpіc
but I'd figured I'd asκ. Would you be interested in traԁing linκѕ oг maybе guest ωrіting a
blοg post or vicе-versa? My site adԁresses a lot of the sаme topіcs as yours and I feel we cоuld greatly benefit frοm each other.

If you're interested feel free to send me an email. I look forward to hearing from you! Terrific blog by the way!

Review my website :: cheap Power Boat online

Anonymous said...

Hey this is ѕomeωhat of off topic but I was wanting to
κnоw if blogѕ uѕe WYSIWΥG editoгs or
if yοu havе to manually code with ΗTML.
I'm starting a blog soon but have no coding skills so I wanted to get advice from someone with experience. Any help would be greatly appreciated!

My web page: Plattformlifte Berater

Anonymous said...

ӏ love гeaԁіng through a ρost
thаt cаn maκе pеοple think.
Alѕο, many thаnκs fоr permіtting me tо
comment!

my blog ροst :: cheap pontoon sailboat auction online

Anonymous said...

Thank you, I've just been looking for info approximately this topic for a while and yours is the greatest I have found out till now. However, what concerning the bottom line? Are you positive in regards to the source?

Also visit my page - best cheap stairlift

Anonymous said...

Hellο! І'm at work browsing your blog from my new iphone! Just wanted to say I love reading through your blog and look forward to all your posts! Keep up the superb work!

Check out my blog; Best cheap Luxury watches