GLOBAL TRUST BANK

PRESENTED BY :

JYOTI BHUSHAN (1224108216) LAWI ANUPAM (1224108221)

GITAM INSTITUTE OF INTERNATIONAL BUSINESS VISAKHAPATNAM

Global Trust Bank
• GTB opened its first branch in Secunderabad on October 30,1994 • Collected Rs. 100crores of deposits on the first day of its operations • Promoters – Ramesh Gelli, Jayanta Madhab, Sridhar Subasri • August 14, 2004, GTB was amalgamated with Oriental Bank of Commerce • New generation banks – GTB, ICICI, HDFC, UTI

Corporate Mission To be a modern and model bank and to improve customer satisfaction and service through reduction in cost of operation and intermediation and spur innovation of specialized, customer friendly products. Corporate Vision • • • • • Build the business and the institution Create shareholder value Grow profitability Develop a complete financial services organization Foster a caring and sensitive organization

Ramesh Gelli, The Founder
• Ramesh Gelli – Chief Managing Director of Vysya Bank for 10 years • Studied at Asian Institute of Management, London Business School and Osmania University • Member on AP State Planning Board, Board of Governors for Organization Development • Trustee of India Board Equity Fund and Naandi, an NGO • President of AIMA , Honorary secretary of Indian Bank Association • First Indian banker awarded Padmashri • Positioned GTB as a regional bank

Rapid Rise of GTB
• Initial Public Issue of RS 1040mn received subscriptions of Rs 62.40bn from over 1 mn investors • Received Rs 1bn of deposits on day 1, Rs 10bn by the end of first year and Rs 27bn at the end of 3 years • GTB won Best Export Performance Award from the Gem and Jewelry industry • Established more than 500,000 client relationships • Present in all major cities, systematically spreading coverage in smaller cities • Rated first amongst India Best Banks by Financial Express

Business Model of GTB
• Adopted a simple expedient of offering high deposit rates to investors • Loans given mainly on the basis of personal guarantee without any collateral security • GTB has spread its higher deposit rates over its lending rates • GTB focused its lending to the small and medium companies, which could be charged higher rate of interest • Within SMEs, GTB focused on exporters of garments, diamonds, IT, pharmaceuticals etc and give loans at higher interest rates

Critical Success Factor
• Strong customer base • Middle class family • Presence of Ramesh Gelli • Use of technology to serve customers • Human side of bank • Flexible time

First Sign of Trouble
• • • • • Credit decision process. In 2000, bank fell short of capital Lend to capital market (Ketan Parekh) Swap ratio of 9:4 (UTI:GTB) Share price- 2001/07 - 25.70 2004/08 - 3.60

Down fall
• In experience of branch manger • Ketan Parekh close to Ramesh Gelli.(no bank can lend 20% of its money to more than one sector).Gelli’s dominance • Nexus between HFCL & KP with GTB officials by Ernst and young in 2001.

Merger with UTI
• • • • • • Gelli rigging up UTI threat Unfavorable Swap Ratio Wrong estimation of Swap Ratio Demand for fresh evaluation of Swap Ratio Fall in GTB’s share price may lead to further erosion of the holdings • UTI alleging against NBFC’s and brokers

TOWARD AN INGLORIOUS DEMISE
 Auditors submitted report on sep 30,2003  Accounts prepared on going concern though net worth substantially eroded  Laons not fully secured  Accounting method consistent except stautory reserve permitted by RBI  RBI monitored bank on monthly basis  Capital adequacy ratio turned negative though net worth improved a bit(Nov 2003)  RBI insisted for merger  Non-performing assets increased  RBI wanted to avoid controversy by allowing a Cayman Islands – registered to take large stake in GTB  July 2004 moratorium for 3 months , July 26 GTB taken over by OBC a PSB

Insider Trading Charges
• 2002 – prima facie evidence against promoters of GTB • Unusual trading activity in GTB before and after announcement of takeover of GTB by OBC • 16% of GTB share were offloaded by investor between June 14 and July 24 • • Smaller investors increased from 41 to 51% when bank was declared dead • 2004 – SEBI announced it indicate insider trading • Bank was headed and quickly dumped their stock • Outside the information loops were losers

THANK YOU

2003 Assets Profits Intrest Income Capital

2002

2001

2000

1999

1998

1997

1996

1995

1994

7439.52 7346.13 9471.97 -389.58 539.6 121.36 40.47 724.22 121.36 80.69 897.5 121.36

7542.1 5200.33 3781.49 2651.53 2213.53 108.92 695.51 121.36 70.89 491.36 104 80.21 399.08 104 57.46 356.83 104 40.41 171 104

959.34 1657.51 14.55 36.04 104 0.84 4.14 8.25

ROA Asset Turnover Debt equity ratio

-5.23663 0.550902 0.851882 1.44416 1.363183 2.121122 2.167051 1.825591 1.516668 0.050678 0.072532 0.098585 0.094753 0.092217 0.094486 0.105535 0.134575 0.077252 0.037567 0.002498 60.30125 59.53172 77.04853 61.14651 49.00317 35.36048 24.49548 20.28394 8.224423 199.9103

ROE

-22.9037 3.233218 6.219249 8.143256 6.311712 7.915543 7.143645 2.860662 0.468606 0.025305

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