UTI Bank was among the top losers in banking sector stocks on Wednesday on selling pressure following disappointing results of the bank.
The scrip of the private sector bank was down by 4.47% at Rs 44.90 on the BSE by 12:15 IST. A total of 77,816 shares changed hands on the counter. The scrip had done relatively well in recent sessions. Between 31 March and 6 May 2003, it rose by 20.5% to Rs 47 from Rs 39.
The fall in the UTI Bank scrip is attributed to disappointing results of the bank.
UTI Bank announced it's results on Tuesday. For the fourth quarter ended 31 March 2003, it posted a net profit of Rs 60.53 crore on total income of Rs 516.20 crore (Rs 5.16 billion). For the year ended 31 March 2003, its net profit stood at Rs 192.18 crore (Rs 1.92 billion) on total income of Rs 1,875.28 crore (Rs 18.75 billion). The bank's board has recommended a dividend of 22% for FY 2002-03.
Analysts said the results were disappointing, as at the operating profit level, there has been a flat 1% growth for the full year, despite its net interest income rising by 62% to Rs 322.40 crore (Rs 3.22 billion). The rise in net profit has come due to the fall in provisioning. Meanwhile, the company's cost of funds are also high at 7.5%, compared to other banks whose cost of funds on an average is at 6.5%.
However, analysts feel that after a correction, the stock may recover. They said that UTI Bank's focus on the retail segment will reap good dividends in the near future. The bank continues to focus on its three main drivers of growth i.e. net interest income, retail banking and fee-based income.
Earlier, there were reports that foreign funds have started approaching Unit Trust of India in order to acquire the latter's 33.56% stake in UTI Bank. Any investor who takes this stake will have a majority control in the bank. Other investors in the bank could also tag along with UTI to sell their equity holding in the bank, the report suggests.
Analysts said that if UTI's stake is offloaded to an investment banker, a change in management control may not take place. But, if it is sold to a foreign bank, a more professional management may take charge of UTI Bank. Also, with the stake changing hands, an open offer will be triggered, which will benefit UTI Bank's shareholders.
Another advantage from the probable sale of stake is that the low capital adequacy ratio of UTI Bank will improve. It will help the bank to release more funds to retail customers. The bank's CAR stands at 10.9% as against the stipulated 9% by Reserve Bank of India.
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