UTI Bank posts remarkable topline growth - Views on News from Equitymaster

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UTI Bank posts remarkable topline growth

Jul 20, 2000

UTI Bank has recorded a YoY 152% jump in its net profits to Rs 161 m in 1QFY01. However if we exclude the provision & contingencies from the profits it reflects an increase of just 27%. The retail focus of the bank through wide branch and ATM network coupled with increase in low cost deposits enabled the bank to grew its interest income by 57% during the 1QFY01. However due to more than proportionate increase in the interest expenses operating margins declined to 9.7% (14.4% in 1QFY00). The rise in the other expenses by 74% was mainly on account of investment in technology and training of human resources which will drive the bank's future profits.

(Rs m) 1QFY00 1QFY01 Change
Interest Income 1,075 1,688 57.0%
Other Income 169 298 76.0%
Interest Expended 921 1,525 65.7%
Operating Profit (EBDIT) 155 163 5.4%
Operating Profit Margin (%) 14.4% 9.7%  
Operating Expenses 125 218 74.8%
Depreciation 28 30 10.5%
Profit before Tax 172 212 23.7%
Provisions & Contingencies 65 2 -96.3%
Tax 43 49 12.9%
Profit after Tax/(Loss) 64 161 152.2%
Net profit margin (%) 5.9% 9.4%  
No. of Shares (eoy) (m) 131.9 131.9  
Diluted number of shares 131.9 131.9  
Diluted Earnings per share* 1.9 4.9  

The bank has plans to establish itself as a one stop financial mart through its focus on retailing and cross-selling other financial products. As part of its new strategy the bank will leverage the synergies with its promoting institutions (UTI, LIC, GIC) in all areas of operations.

At the current market price of Rs 41, UTI Bank is trading at PER of 8.4 times its 1QFY01 annualised earnings. The Bank's Price/Book value ratio of 2.1 times is comparatively less than HDFC Bank's 8 times and ICICI Bank's 4 times. The bank's focus on e-commerce and improvement in NPA ratio will improve the valuations in time to come.

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