India's Global Trust Bank Targets Growing Equity Culture
Monday, February 14 6:06 PM SGT
HYDERABAD, India (Dow Jones)--After a two-year period of asset consolidation, Global Trust Bank Ltd. (P.GTB), one of India's top new private sector banks, is looking to expand its lending and stock-related financial activities amid a boom in Indian equities, Chairman Ramesh Gelli told Dow Jones Newswires.
The move comes as the bank seeks to boost its balance sheet by 35% in both fiscal 2000 and 2001, he said.
"Last year, we consciously slowed down (our asset growth) because of the industrial slowdown. We were focussing on (turning around) underperforming assets and bad loans," Gelli said.
Analysts said the bank is now set to grow on the back of the country's stock market boom and the burgeoning interest in equities in the country.
The key Bombay Stock Exchange Sensitive Index, or Sensex, has risen 20% since Jan. 1, following a 65% rise last year, and stock market investing is quickly spreading into the country's middle class.
Under its new strategy, the bank plans to become more involved in all aspects of equity-related financial services, including electronic share trading and equity-collaterized lending, as well as stepping up its more traditional services of offering depositary accounts and clearing services.
Global Trust was one of the India's first providers of depository accounts and is now one of the biggest. It is also one of the biggest clearing houses on the Bombay Stock Exchange.
"We are looking at providing financial services such as demat accounts (electronic share accounts)," Gelli said, adding that the bank's new plan focusses on "mid-sized companies and middle-income savers".
This will include setting up more automated teller machines, or ATMs, and depository accounts, he said.
Gelli said that with bad loans now under control, the bank is concentrating on increasing net profit and income, Gelli said.
Bad loans were down to 2.2% of net loans by March 1999, and are expected to slip below 2% by March, he said, adding, "our asset quality has improved and this gives us a sounder base to grow on."
That improvement has prompted the World Bank's private funding arm, the International Finance Corp., which has provided $10.0 million of Global Trust's Tier-II capital, to consider converting part of the debt to equity.
If the IFC, which currently holds 9.88% of the Indian bank, exercises an option to convert INR5.0 million of the Tier-II capital into equity, its stake in Global Trust would rise to 12.8%, he said.
Tier II capital refers to a bank's unsecured debt. - Looking For Global Technology Partner
The bank is actively looking for a partner in banking technology, Gelli said.
"We are looking for a strategic partner in banking technology, with good experience in providing financial services and settlement of services on an IT (information technology) platform," he said, adding that "for our requirements, it has to be a foreign institution with strength in technology."
The bank, however, has yet to impress analysts with its new initiatives. In fact, most broking houses don't have a recommendation on the bank's stock. As one analyst put it: "The big news will come when the bank ties up with a big name."
Shares of Global Trust Bank are trading at INR76.70 on the Bombay Stock Exchange at 0930 GMT, down INR0.4 or 0.5% |
