Retail sector gives a boost to income

Updated: Apr 30 2006, 05:30am hrs
A buoyant economy is reflected from the numbers posted by banks. A healthy growth in the corporate sector has resulted in strong credit offtake. Increased activity in the infrastructure development and high retail demand for housing and personal loans have provided banks with big opportunities. Banks are compensating the drop in income from lower interest rates with increase in fee-based income.

The retail and banking business of UTI Bank has increased substantially. Out of the retail advances, housing loans constituted around 41%, while auto loans were around 39%.

The bank has a branch network of more than 450 offices and extension counters and a network of about 1,900 ATMs. Its retail distribution centres are spread across 43 towns and cities and it also plans to increase this number. The banks strategy of retail asset centres is translating into strong numbers.

UTI Bank is also expanding its international presence to the Gulf, Hong Kong, China and Sri Lanka. Its Singapore branch is already functional.


For the year ended March 31, 2006, total income of the bank went up by 54.63% to Rs 3,618 crore and net profit went up by 75.7% to Rs 485 crore. The bank registered net profit growth of 45% over the previous year. Total income and net profit for Q4FY06 was at Rs 1,061 crore and Rs 152 crore, respectively. Provisions and contingencies aggregated to Rs 263 crore in FY06 as against Rs 62 crore in the previous year. Net NPAs were at 0.75% in Q4FY06 as compared to 1.07% in the corresponding period last year.

Growth in the business led to increase in operating expenses. Operating expenses increased by 40% in FY06 to go up to Rs 814.05 crore as compared to Rs 581.38 crore in FY05.

The bank's net advances surged by around 43% to Rs 22,300 crore led by strong growth in both the corporate and retail advances segment. Corporate advances were up 38.6% to Rs 15,800 crore while retail advances witnessed a rapid growth of 55.1% to Rs 64,900 crore. For FY06, the capital adequacy ratio (CAR) was at 11.08% as against 12.66% in FY05.


The share capital of the bank is Rs 278.69 crore with reserves of Rs 2,593 crore. UTI is trading at Rs 344 at a P/E of 20x based on FY06 numbers against the industry P/E of 16.04x. The price to book value is 2.8x.

The author does not have any investments in the company