UTI Bank has reported a spectacular rise in net profits in the September quarter driven by over 200% jump in other income. Surprisingly, the bank's operating margins have also gone up by about 420 basis points.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Provisions & Contingencies
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy)
Diluted Earnings per share*
P/E (at current price)
The bank's other income growth was driven by strong treasury operations, which accounted for 36% of its PBT. Treasury operations of the bank have been broadened to include liquidity management, forex, money market and derivative trading. Other income accounted for 25% of total income as against 12% in 2QFY01.
During the quarter, the bank's interest income rose by 30%. This growth was however lower than the 58% rise recorded in 1QFY02. A slowdown in the industrial activity is taking toll on the bank's interest from advances.
UTI Bank's operating margins in the current quarter improved sharply, as the bank diversified its deposit portfolio. Saving account deposits witnessed a commendable rise of 71% in the first half of the current year, leading to lower cost of funds for the bank. The bank's investments in infrastructure (ATMs and technology) has contributed to this rise. On the asset side too, retail banking accounted for 17% of PBT. The proportion of retail assets is however low, which could affect the bank's asset quality in future (risk in corporate banking business is relatively high in a sluggish economic environment).
The bank's cost to income ratio has also come down to 36% from 54% in 2QFY01. However, its NPA provision has increased by over 5 times to Rs 328 m. In the first half of FY02, the amount has increased by 10 fold YoY. UTI Bank's NPA provision coverage ratio was just 20% in FY01. This was much below its peers in the industry. Increasing the provisioning amount in the current year, could move up the coverage ratio, provided gross NPAs do not rise substantially. Considering UTI Bank's higher exposure to corporate clients (47% of PBT), there are likely chances of gross NPAs moving in the upward direction going forward.
UTI Bank has recently placed 26% of its equity capital with CDC Financial Services (Mauritius) Ltd. to spur the capital adequacy ratio (CAR) which stood at 7.9% in 1QFY02. Although, this will dilute the bank’s equity capital by 36%, the injection of capital worth Rs 1.6 bn will support the bank’s future growth. The bank is also in the process of raising additional Tier II capital of upto Rs 1.5 bn. This would further increase its CAR.
At the current market price of Rs 26, UTI Bank is trading at PER of 2.8x 2QFY02 annualised earnings. The bank's Price/Book value ratio of 1x is in line with the other private sector banks.
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