In Focus: New Account

UTI Bank (Idirect Code: UTIban) posted robust results for the third quarter of 2006-07, growing at 40 per cent y-o-y. The bank has managed to grow consistently at more than 30 per cent in 26 of the last 28 quarters. While expenses increased by 67 per cent, these were attributed to branch expansions. Profits were boosted by 61 per cent growth in other income, concurrently the net interest margin also increased consistently.

With unabated credit growth in the midst of rising interest rates, the banking sector is currently plagued by higher borrowing cost and an increasing credit-deposit ratio which has in turn emphasized the need to mobilise higher deposits. But UTI has shown resilience by raising low-cost deposits by as much as 60 per cent. With fee-based income growing 59 per cent, the threat of higher borrowing costs will be averted. It has made provisions for adding revenue streams by enlisting MetLife India as its bancassurance partner. There are plans for starting an asset management company and making greater inroads in niche segments such as priority banking.

The third quarter had its share of crises due to phishing attacks. However, the bank cannot take any real action in the absence of a registered brand name and copyright. This realisation dawned upon the management after 13 years of existence. Time is running out for the company given that it can use the UTI name only till 2008, the amount spent on enhancing the brand equity of UTI over the years will then be a sunk cost and fresh outlays will be required for brand building. The shareholding pattern of the bank is quite peculiar, making it a private sector bank mostly owned by public sector institutions (43.24 per cent). Other prominent shareholders include HSBC Financial Services, Barclays and Citigroup, holding more than 4 per cent stake each in the bank (as on Dec 31, 2006).