UTI Bank announces Q1 FY 07 net profit of Rs. 120.55 Crores, up by 30.14% YOY

UTI Bank has announced its unaudited results for the first quarter of FY 2006-07, following the approval of its Board of Directors in a meeting held in Mumbai on 13th July 2006. The Net Profit of the Bank for the first quarter was Rs 120.55 crores, a growth of 30.14% over the Net Profit of Rs. 92.63 crores during the first quarter of the previous year. The Bank has ended the first quarter of the current financial year with Net NPAs at 0.73% of Net Customer Assets and with a capital adequacy ratio of 10.28%. The Bank intends to augment its Tier-I capital in this financial year. The quarterly EPS (diluted) at Rs. 4.22 was 27.88% higher than the EPS of Rs. 3.30 in the first quarter of the previous year.

RESULTS FOR Q1 FY 06-07:
The core businesses of the Bank have grown strongly in Q1, leading to an Operating Profit of Rs. 307.18 crores, a growth of 50.96% over the Operating Profit of Rs. 203.48 crores in the first quarter of the financial year 2005-06. The Net Interest Income (NII) for Q1 was Rs. 321.84 crores, a growth of 44.66% yoy over the NII of Rs. 222.48 crores during Q1 of the preceding year. Similarly, fee and other income during Q1 was Rs. 184.55 crores, a growth of 60.65% over the fee and other income of Rs. 114.88 crores during Q1 of the preceding year. This growth in earnings has been possible because of the rapid expansion in Advances. Net Advances have grown by 65% yoy, with Retail Advances growing by 82% yoy. Further, the Bank´s balance sheet size has grown by 39% yoy to Rs. 53,002.23 crores as at end June´06 from Rs. 38,014.13 crores as at end June´05.

Impact of Regulatory Changes
The following regulatory changes during this financial year have also increased the provisions made by the Bank:

1. An increase in provisioning rates for standard assets from 0.40% to 0.55% for the quarter ended 30.06.2006 on commercial real estate loans, residential housing loans beyond Rs. 20 lakhs, personal loans and loans to the capital markets has led to a higher provisioning of Rs. 7.29 crores;
2. Abolition of Section 10(23)(G) of the Income Tax Act that has affected valuations of tax-free bonds to the extent of Rs. 88.37 crores;
3. RBI´s guidelines on floating provisions, consequent to which an additional provision has been made for NPAs of Rs. 13.47 crores.

Q1 Performance Highlights

Rising Net Interest Income (NII)

The Bank registered a buoyant 45% yoy growth in Q1 in its Net Interest Income of Rs. 321.84 crores as against Rs. 222.48 crores in Q1 of the previous year. A strong growth in the levels of advances and investments, together with a higher share of demand deposits, contributed to the rise in Net Interest Income. The advances of the Bank grew to Rs. 25,836 crores as at end June´06 from Rs. 15,666 crores as at end June´05, a growth of 65% yoy.

Strong Balance Sheet Growth leading to Lower Margins

The Net Interest Margin (NIM) for Q1 increased marginally to 2.68%, from the NIM of 2.66% in Q1 of the previous year, but was down from 2.96% in Q4 of the previous year. The downward pressure on spreads has arisen partly on account of the very rapid growth in advances (which has led to a larger part of this growth being funded out of term deposits), as also because of the increase in interest rates during the quarter (as liabilities have a shorter average duration, they reprice faster than assets). As the growth of the Bank becomes more modest and interest rates plateau, the NIMs can be expected to again rise.
The daily average cost of funds increased by 52 basis points to 5.45% in Q1 as compared to 4.93% in Q1 of the preceding year, FY 2005-06. The share of low cost deposits - Savings Bank and Current Account - rose to 35% as at end June´06 as compared to 32% as at end June´05. Savings Bank deposits registered a growth of 61% yoy, from Rs. 5,116 crores as at end June´05 to Rs. 8,225 crores as at end June´06. Current Account deposits grew 43% yoy, from Rs. 4,683 crores as at end June´05 to Rs. 6,713 crores as at end June´06.

Trading Profits

The Bank generated Rs. 39.95 crores of trading profits in Q1, as compared to Rs. 35.13 crores in Q1 of the preceding year, a growth of 14% yoy. The share of trading profits to operating revenue declined from 9% in Q1 of the preceding year to 7% in Q1 of FY 05-06.

Prudent NPA Management

The Net NPAs as a proportion of Net Customer Assets were at 0.73% as at end June´06, significantly down from 1.19% at end June´05 and marginally down from 0.75% as at end March´06. The Gross NPAs as a proportion of Gross Customer Assets were at 1.25% as at end June´06, significantly down from 1.82% at end June´05 and marginally down from 1.28% as at end March´06. The Bank has in recent years written off impaired assets aggressively. The provisions held together with accumulated write-offs as a proportion of Gross NPAs and accumulated write-offs amount to 77% at end June´06. If the accumulated write-offs are excluded, then the provisions held as a proportion of Gross NPA amounts to 42% as at end June´06.

Fee and Other Income

Fee Income registered a robust growth of 61% yoy, rising to Rs. 184.55 crores in Q1 as compared to Rs. 114.88 crores in Q1 of the preceding year.

Cash Management Services

Under Cash Management Services, the Bank handled a cash remittance throughput of Rs. 55,434 crores in Q1 as compared to a throughput of Rs 38,247 crores during Q1 of the preceding year, a growth of 45% yoy. The number of CMS clients has grown to 1,547 as at end June´06. The Bank collects commercial taxes on behalf of the governments of Andhra Pradesh, Gujarat, Uttaranchal, Chattisgarh, Delhi and Punjab and also handles tax collections on behalf of CBDT and CBEC. The Bank also collects utility payments under the ´eSeva´ initiative of the Andhra Pradesh government, the ´Sampark´ initiative of the Chandigarh Union Territory, and the ´Bangalore One´ project of the Karnataka government.

Placement / Syndication and Project Advisory

The Bank continued to maintain its leadership position in the placement and syndication of corporate bonds. The Bank placed debt to the tune of Rs. 7,496 crore in Q1 of the current year as compared to Rs. 7,256 crores in Q1 of the preceding year. The Bank also continues to strengthen its focus on project advisory services.

Growing Retail Business

The Bank´s retail business continued to show strong growth. The number of Savings Bank accounts grew from 26.55 lakhs as at end June´05 to 38.26 lakhs as at end June´06, thereby creating a buoyancy in Savings Bank deposit balances. The Bank has an installed base of over 23,000 Electronic Data Capture (EDC) machines as at end March´06. The Bank´s International Debit Card issuance has risen to 47 lakh debit cards as at end June´06 as compared to 32 lakh cards as at end June´05. The Bank will be launching its Credit Cards in Q2 of this year.
Retail Advances registered a significant jump, moving from Rs. 4,320 crores as at end June´05 to Rs. 7,842 crores as at end June´06, a growth of 82%. Retail Advances now account for 30% of the total Advances of the Bank as at end June´06. The Bank has set up Retail Asset Centres (RACs) at 15 cities and Satellite RACs at 31 additional cities for focussed retail lending.

Network Expansion:

The Bank´s ATM network of 1,959 ATMs is the third largest in the country, up from 1,667 ATMs a year earlier. The Bank has a wide presence through its 463 Branches & Extension Counters across 263 cities, towns and villages. The Bank has added 113 Branches and Extension Counters across an additional 67 cities and towns in the last one year.

Network Expansion:

The Bank´s ATM network of 1,959 ATMs is the third largest in the country, up from 1,667 ATMs a year earlier. The Bank has a wide presence through its 463 Branches & Extension Counters across 263 cities, towns and villages. The Bank has added 113 Branches and Extension Counters across an additional 67 cities and towns in the last one year.

Capital & Net Worth:

The Net Worth of the Bank stood at Rs. 2906.90 crores as at end June´06 as compared to Rs. 2,555.77 crores a year earlier, a growth of 14%. The Capital Adequacy Ratio for the Bank was at 10.28%, as at end June´06, as compared to 11.74% as at end June´05. The Tier - I capital amounted to 6.70%. The Bank intends to raise fresh Tier-I capital in the current financial year.

Launch of International Business

In April 2006, the Bank opened its first overseas branch, at Singapore, with a focus on offshore corporate and capital markets businesses.

Source : Equity Bulls

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