UTI Bank, one of the largest private sector banks in the country has reported a 43% jump in its net profits for FY03. Topline on the other hand has increased by 24% in the same period. This performance has been consistent with the bank's performance throughout the year. Infact, on a nine month basis, net profits had grown by a similar 43%. In 4QFY03 also net profit growth has been 44% while topline has grown by 14% on a YoY basis.
Income from Operations
Net interest income
Operating Profit Margin (%)
Provisions and Contingencies
Profit before Tax
Profit after Tax/(Loss)
Net Profit Margin (%)
No. of Shares (m)
Diluted Earnings per share*
Growth in topline has been mainly fueled by a robust 34% growth in advances. Retail assets, as is true for almost all banks in FY03 has been the growth driver for UTI Bank's advances also. Retail advances have registered a growth of 354% in FY03 and they now constitute 15% (5%) of total advances. However apart from the growth in topline net interest income growth has been a key feature of the bank's financial performance in FY03. Net interest income has grown by 62% in FY03, mainly driven by topline growth as well as fall in interest costs. Net Interest Margin (NIM) stands at 2.1% compared to 1.7% a year ago. But having said that we must also point out that NIM for UTI Bank is still lower than its peers like HDFC Bank and IDBI Bank.
Interest on advances
Income from investments
Interest on balance with RBI
NIM improvement has been brought about by increasingly leveraging on retail deposits. The bank has been able to reduce its average cost of funds from 8.7% to 7.5%. While the net interest margins have improved , operating margins have fallen as the bank was still in the expansionary phase in FY03 and hence its operating expenses are still growing considerably. The bank has increased its branches by 53 and has increased its ATMs to 822 (491). This goes to show the aggressive infrastructure expansion initiative the bank had undertaken in FY03. Due to this, cost to income ratio of the bank has deteriorated to 44% compared to 34% in FY02.
While operating profit has been poor other income and lower provisioning have helped the bank increase its profit before tax considerably. The bank's other income has fallen in FY03, as trading income has reduced significantly. On the positive side however fee income growth has been considerable (47%) over last year, indicating that going forward, the bank's other income growth will be dependent more on fee income. Hence we may also observe a fall in other income going forward till fee income assumes a large part of other income.
UTI Bank has considerably reduced its NPA provisioning in FY03. Provisioning in 4QFY03 has been even lower compared to the same period last year. Despite this the bank has been able to bring down its net NPAs to advances ratio has fallen to 1.9% compared to 2.7% last year. But we must point out that compared to its peers like HDFC Bank and IDBI Bank, net NPA ratio is still relatively high. While the bank seem to be addressing the issue of high NPAs, the speed with which it does this still remains in question, as observed by the fall in provisioning.
The stock is currently trading at Rs 47, a price to book value ratio of 1.2x. As mentioned in our analysis of the December quarter results, we reiterate that while UTI Bank has reported a robust growth in its core business of disbursals as well as improvement in its operating profits, net profit growth has been led mainly by lower provisioning. Provisioning ratio for UTI bank is still lower compared to peers like IDBI Bank and HDFC Bank. While the retail thrust is paying off, management of NPAs and competition may be the key factor to look out going forward.
Axis Bank declared the results for the third quarter of the financial year ended March 2017 (3QFY17). The bank has reported 4.1% YoY growth in net interest income while net profits declined 73.4% YoY in 3QFY17.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407