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UTI Bank: Corporates' bring in the cream

Oct 24, 2002

UTI Bank's strong growth in FY03 continues. For 2QFY03 the bank reported a significant 43% profit growth led by 34% growth in interest income. Higher growth in earnings was achieved despite a 40% hike in provisions for non-performing assets.

(Rs m)2QFY022QFY03Change1HFY021HFY03Change
Income from operations 2,741 3,674 34.0% 5,405 7,018 29.8%
Other Income 922 1,184 28.5% 1,931 1,782 -7.7%
Interest expense 2,345 2,960 26.2% 4,733 5,705 20.5%
Net interest income 396 714 80.3% 672 1,313 95.3%
Other expenses 476 763 60.1% 903 1,362 50.8%
Operating Profit (80) (48)-39.8% (231) (49)-78.8%
Operating Profit Margin (%)-2.9%-1.3% -4.3%-0.7% 
Provisions and contingencies 328 45940.2% 746 480-35.7%
Profit before Tax 514 67631.7% 954 1,25431.4%
Tax 204 23514.9% 391 45215.7%
Profit after Tax/(Loss) 310 44242.7% 563 80242.3%
Net profit margin (%)11.3%12.0% 10.4%11.4% 
No. of Shares (m) 131.9 191.8   131.9 191.9  
Diluted Earnings per share*6.59.2 5.98.4 
P/E Ratio 4.1  4.5 

The bank's core interest income recorded a very strong growth of 59% during the quarter largely due to the rise in disbursals by the bank. The net interest income of UTI Bank saw a sharp growth of 80% during the quarter. The growth has been driven by a 50% surge in advances (up from Rs 44.6 bn in September last year to Rs 67.1 bn). An increase in other income too aided pre-tax profit growth.

Interest income break-up
(Rs m)2QFY022QFY03Change1HFY021HFY03Change
Interest on advances 1,190 1,898 59.4% 2,447 3,504 43.2%
Income on investments 1,326 1,171 -11.7% 2,629 2,767 5.2%
Interest on balance with RBI 73 97 32.5% 154 223 44.6%
Others 151 508 236.3% 174 523 200.5%
Total 2,741 3,674 34.0% 5,405 7,018 29.8%

UTI Bank's retail initiatives continue to aid its performance. The savings bank (SB) deposit base grew by over 59% YoY to Rs 10.9 bn as on 30th September '02. The SB customer accounts grew significantly from 400,565 to 720,064 during the same period, a growth of 80% YoY. The retail asset base has grown over 144% to Rs 7 bn YoY. The bank has identified housing and personal loans as key focus areas.

While retail banking's contribution to total revenues increased from 9% in 2QFY02 to 14.5% in the September quarter this year due to a huge 300% surge in retail banking revenues, the PBIT from this segment was negative and proved to be a drag on overall profitability. Though corporate banking share in revenues dipped from 51% levels to 48.5% in 2QFY03, the segment's share in profits expanded significantly to 92% of total PBIT.

Revenue pie break-up
Corporate Banking50.9%48.5%50.9%48.6%
Retail Banking9.0%14.5%8.3%14.7%
Treasury 40.0%37.1%40.6%36.7%

At the current market price of Rs 38, UTI Bank is trading at a P/E of 4.5x 1HFY03 annualised earnings and adjusted price to book value ratio of 1.5x. The bank's aggressive expansion has reduced its capital adequacy ratio to 9.7% as on September 2002 from 10.7% in March 2002. The bank has appointed Saloman Smith Barney to raise funds to improve its capital adequacy ratio.

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