UTI Bank: 1QFY04 net up 45% - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

UTI Bank: 1QFY04 net up 45%

Jul 22, 2003

UTI Bank, one of the leading private sector banks, has reported a robust performance in the June quarter. The bank has witnessed a 18% growth in its topline while bottomline growth has been even better at 45%. UTI Bank's performance in the June quarter has been highlighted by the strong improvement in operating profits and consequently operating margins. While operational gains have aided bottomline growth, what is commendable about the bank's performance is the fact that bottomline has grown strongly despite higher provisioning.

(Rs m)1QFY031QFY04Change
Income from Operations 3,344 3,939 17.8%
Other Income 599 1,503 151.0%
Interest Expenses 2,746 2,737 -0.3%
Net interest income 599 1,202 100.7%
Other Expenses 599 817 36.3%
Operating Profit (0) 385
Operating Profit Margin (%)0.0%9.8%
Provisions and Contingencies 21 917
Profit before Tax 577 971 68.1%
Tax 218 449106.3%
Profit after Tax/(Loss) 360 522 45.0%
Net Profit Margin (%)10.8%13.2%
No. of Shares (m) 191.8 230.2
Diluted Earnings per share*6.39.1
P/E Ratio8.0

Growth in topline has been mainly fueled by a strong growth in income from investments. Total investments of the bank have risen by 25% in this period, this explains the strong growth in income from investments. Advances on the other hand have grown by 9% on a YoY basis. Retail assets (246% growth in the June quarter), has been the growth driver for UTI Bank's advances. The growth in retail assets indicates that the bank's wholesale or corporate loan portfolio has shrunk. However, apart from the growth in topline, net interest income growth has been a key feature of the bank's financial performance in 1QFY04. Net interest income has grown by 101% in 1QFY04, mainly driven by topline growth as well as fall in interest costs. Net Interest Margin (NIM) stands at 2.8% compared to 1.7% a year ago. Net interest margins however, continue to remain lower than industry leaders like HDFC Bank.

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 8.1% to 6.4%. UTI Bank has also managed to improve its operating margins considerably. The bank has expanded reach by increasing the total branches to 203 and ATMs to 900. The operating costs of the bank have increased significantly and we believe that the improvement in operating income has been mainly due to strong topline growth.

Strong other income growth has helped the bank increase its profit before tax considerably. However, in the June quarter the bank has witnessed a fall in fee income, whereas trading income has risen significantly. Since the sustainability of trading income is in question, going forward the bank may not be able to maintain the strong earnings growth unless there is improvement in fee based income as opposed to trading income. The bank's other income had fallen in FY03, as trading income had reduced significantly. However, in 1QFY04 there has been a strong increase in the bank's fee based income. Fee income growth had been considerable (47%) in FY03 on a YoY basis.

UTI Bank has considerably increased its NPA provisioning in 1QFY04. The bank has been able to bring down its net NPAs to advances ratio to 2.2% compared to 2.4% 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.

The stock is currently trading at Rs 73, a P/E ratio of 8x its annualised 1QFY04 earnings. While the bank has reported strong results in the June quarter, we would like to point out that this has come about primarily due to strong growth in investment income. The slow growth in advances indicates that competition may be weighing heavily on the bank. UTI Bank continues to lag its peers on the NPA front. The stock has seen significant activity in the recent past due to rumours of a stake sale by parent UTI.

Equitymaster requests your view! Post a comment on "UTI Bank: 1QFY04 net up 45%". Click here!


More Views on News

Axis Bank's Stock Falls as Results Disappoint on Asset Quality (Views On News)

Jul 27, 2021

Axis Bank's net profit more than doubles on a spike in other income and lower provisioning.

AXIS BANK Announces Quarterly Results (3QFY21); Net Profit Down 36.4% (Quarterly Result Update)

Jan 28, 2021 | Updated on Jan 28, 2021

For the quarter ended December 2020, AXIS BANK has posted a net profit of Rs 11 bn (down 36.4% YoY). Sales on the other hand came in at Rs 155 bn (down 1.3% YoY). Read on for a complete analysis of AXIS BANK's quarterly results.

7 Stocks that Mutual Funds Can't get Enough of (Views On News)

Dec 1, 2021

Come hell or high water, these are the top Indian stocks which mutual funds never leave.

5 Indian Banks with the Lowest NPAs. Here's How they Did It... (Views On News)

Sep 27, 2021

These banks have managed to maintain their asset quality even in the middle of a pandemic.

PNB Reports an Over Three-Fold Jump in Net Profit as Provisions Fall (Views On News)

Aug 3, 2021

The reduction in provisions for bad loans and asset quality stability may have aided the lender's earnings.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 6, 2021 03:36 PM


  • Track your investment in AXIS BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks