Oriental Bank of Commerce was well received by all sections of the market and coasted to its record high of Rs 124.65 early on Tuesday.

At 10:45 IST, it was still near that high at Rs 124, up 7.59% over yesterday's close. Substantial volumes of over 560,000 Oriental Bank of Commerce shares were registered 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 69% from Rs 73.40 on 25 April 2003.

On 26 April 2003, the board of directors of Oriental Bank of Commerce approved a proposal to return equity amounting to Rs 50 crore out of the total equity of Rs 192.54 crore (Rs 1.92 billion) 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 nine-months results) has risen from Rs 23.4 to Rs 31.6. This has provided a springboard for the scrip. Delhi-based OBC posted a 42% and 31% rise in bottom line to Rs 121.57 crore (Rs 1.21 billion) and Rs 337.46 crore (Rs 3.37 billion) for the third quarter and nine-month period ended 31 December 2002, respectively. This was despite higher provisioning, mainly due to improvement in interest spreads and lower operating expenses.

Dealers say 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.

OBC continues to lay high emphasis on disbursement of credit to the retail sector under various customer-friendly schemes. The housing loan portfolio of the bank has reached a hallmark level of Rs 1,620 crore (Rs 16.2 billion), which works out to 11% of the total advances of the bank.

During the nine-month period ended 31 December 2002, OBC has been able to recover Rs 288 crore (Rs 2.88 billion) of non-performing assets as compared to Rs 166 crore (Rs 1.66 billion) during the previous corresponding year (ended 31 December 2001). Under the Securitisation Act, 2002, the bank has issued notices in 1,244 NPA cases, aggregating to a sum of Rs 146.45 crore (Rs 1.46 billion). The bank has taken over properties in 210 cases, and a sum of Rs 11 crore in cash recoveries has been effected.

Despite releasing 740 employees (5.1%) through a voluntary retirement scheme in March 2001, the bank has redeployed/rationalised its staff strength to increase the customer outlet network by 49 branches and 27 extension counters, taking the total number to 981 branches and 136 extension counters as on 31 December 2002. The implementation of core banking solution, networking of branches and ATMs by the bank is progressing at a hectic pace and the bank has captured live 91% of its business through 932 computerised branches.

Week before last, the bank cut interest rates on loans for small scale units in a bid to enhance credit inflow into the sector. As per the revised rates, effective April 2003, interest on loans of Rs 200,000-250,000 will now attract only a prime lending rate of 11%, instead of the PLR plus 2%. For loans of Rs 2.5-5 million, the interest rate would be 13% as compared to the previous 13.5%, while for loans of over Rs 5 million, it would continue to be PLR plus 3%. The cut in rate is retrospective of the cut in bank rate by 0.25% to 6% in the Monetary Policy 2003.

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

BSE code: 500315