In my 42 years in banking, I have not seen a situation like this," said Supriya Gupta, chairman and managing director of UTI Bank, describing the business conditions now prevailing in the country.
Commenting on the nature of the current absence of demand, he contrasted it with the situation in 1990, when a 150 per cent deposit was needed to open a letter of credit. Those were undoubtedly crisis conditions but they had begun to ease in six months. "The present demand slump has gone on for two- and-a half years," he noted.
"Under these conditions the banking system cannot remain unaffected. The rise in the stock market last year had provided banks, particularly the new private ones like UTI Bank, with opportunity for trading profits. In the current year, banks would have to fall back on their interest spreads to protect the bottom line.," he said.
Outlining the reasons for going public _ UTI Bank is coming out with a combined public offer and offer for sale to raise Rs 73 crore at a premium of Rs 11 per share _ Gupta listed the licensing requirements which had stipulated a public ownership and dilution of promoters' stake as also the need to enhance net worth so as to grow and do more business. On the merits of the issue and the bank, he observed that "we have a good image, the projections are achievable and the issue is reasonably priced."
He added that the bank's operational performance was "as good as the best" among the new private sector banks. On parameters like business growth, operating profit and cost control, it had scored spectacularly. In the last four years (it commenced operations in April 1994), its deposits have grown by a compound annual rate of 100.5 per cent and advances by 63.4 per cent.
"The steady growth in deposits and advance, foreign exchange business, fee based income, the excellent computerised system networked through V-sat and a branch opening policy that ensured that a branch made a profit in its first year of operation, have enabled the bank to maintain its record of steady profit growth," Gupta added.
Explaining the dip in the rate of growth of net profit last year and level of non-performing assets (at 5.6 per cent they are more than that of some other banks), Gupta said, "we have more loan assets than some of our competitors." last year has been an over 100 per cent rise in provisioning and contingencies and also an extraordinary item of Rs 1.03 crore on account of lease terminal adjustment written off. He added that "all the NPA is only substandard, not worse, has large asset backing and is capable of being turned around."
