| This was because overall business improved and the bank was also able to reduce its cost of funds marginally over the June quarter, while lending rates have gone up. |
| In the June quarter, cost of funds had risen 50 basis points. Cost of deposits has come down as low-cost deposits""the savings and current accounts""increased by 63 per cent, while total deposits also went up a robust 44 per cent. |
| Low-cost deposits accounted for 40 per cent of total deposits in Q2 FY06, a major improvement over the June quarter when this number was 35.5 per cent. |
| Even on the advances side, high yielding retail loans grew 66 per cent while corporate advances were up 55 per cent. Net NPAs were up slightly at 0.74 per cent over previous quarter. |
| Trading profits as a percentage of operating revenues have declined to 4 per cent from 16 per cent a year ago, which is quite positive. Plus, a 66 per cent y-o-y increase in fee and other income to Rs 181 crore makes its revenue more broad-based. |
| Though UTI Bank's operating profit grew slightly slower at 16 per cent, compared to the rise in net interest income, it is no cause for concern. |
| Operating expenses increased 53 per cent impacting the operating profit, but that is only because the bank is in an expansion phase, and added 1559 employees during the quarter. It is also one of the few private sector banks to have RBI's permission to open branches this year. |
| UTI Bank has raised capital by way a 150 million overseas bond issue and a Rs 214 crore perpetual bond issue and will not be diluting equity further this year. |
| The bank is bullish on corporate advances going forward which should result in higher net interest margins. The stock is riding high, having gained 70 per cent since June 2006. It trades at a rich 3.4 times estimated FY07 book value and about 2.9 times FY08 book value given its growth prospects. |
| Crisil: Labour pains |
| Crisil had seen an improved demand from bank and mutual funds for its credit rating services in the September 2006 quarter, but that was offset by rising costs like staff expenses. |
| Its consolidated operating profit improved by 38.6 per cent y-o-y to Rs 28.38 crore in the September 2006 quarter, a lower rate as compared to a 57.1 per cent growth in its income from operations to Rs 80.92 crore. |
| As a result, Crisil's consolidated operating profit margins declined by 464 basis points y-o-y to 35.1 per cent in Q3 CY06. The quarterly result was declared after the end of Thursday trading and on Friday, the stock gained 10 per cent. |
| In the June 2006 quarter, the company had grown its operating profit margins by 800 basis points y-o-y to 32.65 per cent. However, the results of June 2006 quarter are not strictly comparable with a year earlier, as the UK-based Irevna acquisition has been included only for June 2005. |
| Meanwhile, senior company management highlighted that with banks increasingly opting for hybrid and tier-II issues, and corporates raising commercial papers (CPs), its ratings services division is seeing better demand. |
| Segment profit of this division rose 47.6 per cent y-o-y to Rs 17.23 crore in the last quarter. Also, strong demand for its research reports from mutual funds, helped segment profit of its research and information services division expand 25 per cent y-o-y to Rs 6.82 crore in the last quarter. |
| However, the company's staff expenses surged 62.9 per cent y-o-y to Rs 30.04 crore in the September 2006 quarter-which is due to more employees after the Irevna acquisition last year and the expansion in its research and information services division. Also, the company saw its other expenses rise 130.5 per cent y-o-y to Rs 15.84 crore in the last quarter. |
| The company's growth is expected to be driven once again by its ratings division, coupled with that of its research and information services division. |
| The stock trades at 29 times estimated CY06 earnings, given the synergies expected from its integration with Standard & Poor's, its US-based parent. |
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