Oriental Bank's decision to return government equity continued to spur the stock on, as it reached its new record high of Rs 141.70 today.

By 11:25 IST, the stock was still near that high at Rs 137, up 4.14% over its yesterday's close. Close to 9 lakh Oriental Bank of Commerce (OBC) shares were registered as volumes by then. The scrip has been rising ever since the company's decision to reduce its capital by paying back Rs 50 crore to the Union government. Since then, the stock has risen 87% from Rs 73.40 on 25 April 2003.

The rise in the scrip comes also on the back of an impressive performance by the state-run PSU bank. On a 30% growth in net interest income to Rs 347.27 crore, net profit rose 87% to Rs 119.49 crore.

The bank undertook lower provisioning of Rs 102.49 crore, a fall of 59% whereas taxation provision (including deferred tax) increased 51% to Rs 108.71 crore.

For FY 2002-03, the bank reported a 43% growth in net profit to Rs 456.95 crore on a 24% growth in net interest income to Rs 1,204.75 crore. The rise in FY 2002-03 profit was mainly due to treasury operations.

The total business of the bank has gone up to Rs 45,486 crore from Rs 42,974 crore last year. The bank registered an average growth of 11.6% in deposits and 17.6% in average advances during the year. The net NPAs have come down to 1.40% compared to 3.1% last year. The bank has made an NPA coverage of 80% compared to 52% last year.

The capital adequacy ratio stood at 14.04% as against 10.99% last year. The return on assets has gone up from 0.99% last year to 1.3% during the financial year 2002-03.

The business captured has gone up to 93% live (through the computerised environment) as against 86% last year. The bank has placed orders for implementation of core banking solution, networking of branches and ATMs and for the setting up of a data centre.

The board of directors of the bank declared a higher dividend of 45% for the year 2002-03 (against 35% in the FY 2001-02).

Meanwhile analysts feel the impressive future prospects of the bank have also generated interest in the stock.

As per reports, the bank is confident that net NPA level can be brought down to zero by the quarter ended September 2003 and that capital adequacy ratio can be boosted to 17% during the same period. Even after returning Rs 50 crore worth of capital to the government, the capital adequacy ratio (CAR) will not drop below 15%.

On 26 April 2003, the board of directors of Oriental Bank of Commerce (OBC) approved a proposal to return equity amounting to Rs 50 crore out of the total equity of Rs 192.54 crore held by the government in the bank. However, necessary approvals from the Union Government and shareholders are still awaited. Currently, the Union Government holds 66.5% stake in OBC.

With the capital reduction, the company's EPS (on the basis of its full year results) has risen from Rs 23.7 to Rs 32. This has provided a springboard for the scrip.

The rise in OBC as well as in the overall banking sector is due to the shifting of funds from the technology sector following growth concerns in the latter sector. In contrast, banking sector stocks appear cheap and growth prospects for the sector on the whole seem strong. There have also been reports that Reliance Mutual Fund will launch a banking sector fund in July, prompting further glee for banking stocks.

The Delhi-based state-run bank, OBC, has a strong presence in the northern and western regions of the country. The bank has been a pioneer as far as NPA recoveries are concerned. The bank has been focussing on lower cost funds. It has aggressively entered the retail segment. In this segment, housing finance occupies the most prominent place. The bank had earlier proposed to complete 91% computerisation by September 2003.

As on 31 March 2003, the public and institutions held 15% and 16.7% equity stake respectively in OBC.