UTI Bank: Staying fit

UTI Bank's rise in net interest margin was driven by a better yield on advances and strong deposits growth.

UTI Bank continues its good performance and has turned in strong numbers for the March quarter with a surprise rise in the net interest margin (NIM), up six basis points up q-o-q to 3.06 per cent.

This is despite a rise in the daily average cost of funds to 5.92 per cent in Q4FY07 from 5.53 per cent in Q3FY07. The rise in the NIM was driven by a better yield on advances as also the strong growth in deposits.

Thus, the increase in the net interest income during the quarter was a smart 48.38 per cent y-o-y at Rs 464.23 crore.

Besides, the bank has also managed to generate substantial revenues through fees which grew nearly 59 per cent y-o-y to Rs 258 crore. As such the operating profit before provisions and contingencies was up to Rs 422 crore, a rise of 46 per cent y-o-y.

Net NPLs were just 0.61 per cent of customer assets, lower than the 0.68 per cent at the end of the December quarter. This is partly because the bank has been resorting to aggressive write-offs in recent years.

Also the provisioning for non-performing loans (NPLs) has been just Rs 8 crore in Q4FY07 compared with Rs 73.7 crore for the full year FY07, indicating that there could have been some write-backs. While the bank had a capital adequacy of 11.57 per cent at the end of March 07, it intends to issue fresh equity in the current year.

Assuming that the bank will be able to command a good premium, the book value for FY08 should be in the region of Rs 178. At the current price of Rs 464, therefore, the stock trades at 2.6 times FY08 estimated book and is attractively valued.

Wartsila India: Weak numbers

Wartsila India has reported a lacklustre performance for the March 2007 quarter, with its operating profit declining 12.85 per cent y-o-y to Rs 8 crore compared with 6.6 per cent fall in net sales to Rs 64.91 crore. Its operating profit margin also declined 90 basis points y-o-y to 12.3 per cent in the last quarter.

Analysts at domestic brokerage houses point out that Wartsila India imports a significant portion of its power equipment from its parent's operations. And given the current global upturn in the capex cycle, its Indian customers have to wait several months to get supplies.

As a result, it led to a decline in the company's net sales in the last quarter. Wartsila is typically involved in medium-sized projects of up to 50-75 MW. In addition, the company has been expanding its focus in the maintenance of power plants.

For CY06 too, Wartsila's operating profit margin declined 320 basis points y-o-y to 12.7 per cent.

The Finnish parent has raised its stake in the Indian arm by 6.89 per cent through its earlier open offer to 96.58 per cent now. As a result, the Finnish parent is planning to shortly delist its Indian arm from the domestic bourses.

With contributions from Shobhana Subramanian and Amriteshwar Mathur