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| UTI Bank's Nayak:
Diversifying risk while emphasising organic growth |
Hongkong and shanghai Banking
Corporation (HSBC) and Barclays Bank have shown interest in acquiring
stakes in UTI Bank. That isn't surprising-India's third-largest
private sector bank is also its most consistent. It has reported
a year-on-year profitability growth of 30 per cent or more in 26
of the last 28 quarters.
It is pretty near the top of charts in other parameters too.
Over the last five years, it has recorded a compounded annual
growth rate (CAGR) in net profits of 41 per cent, in total assets
of 36 per cent, in current account and savings account (casa)
of 63 per cent, in net interest income of 61 per cent and in return
on equity of 26 per cent-placing it among the top-performing banks
in the country. This scorching pace is reflected in its balance
sheet as well. It expects to increase its size by 20-22 per cent
from Rs 83,000 crore now to Rs 1 lakh crore by December 2007.
Little wonder then that it clocks in at #4 in this year's BT-KPMG
banking survey, up from the #9 slot it held last year.
So, what's the secret behind these figures? Says P.J. Nayak,
Chairman & Managing Director, UTI Bank: "We have been
very clear about the broad business segments we want to grow in
and have taken care to diversify risk while emphasising organic
growth." The bank has focussed broadly on three segments-retail,
SMEs and large corporate accounts. "Risk diversification
occurs naturally if you broad-base your lending. If one vertical
doesn't do well, the others compensate for any shortfall,"
he says, adding that UTI Bank is now testing the waters in agricultural
lending.
| UTI BANK BY
THE NUMBERS |
| BALANCE SHEET SIZE: Rs
83,000 crore
ASSETS: Rs 65,000 crore
NUMBER OF BRANCHES: 400 branches in 285
cities, towns and villages
NUMBER OF ATMS: 2,200
ATM TO BRANCH RATIO: 4.5 ATMs per branch
INTERNET BANKING CUSTOMERS: 2.6 million
TOTAL CUSTOMER BASE: 6 million
EMPLOYEES: 9,457
|
It has carved out a strong presence in irrigated districts like
Ludhiana and Patiala in Punjab and West Godavari, East Godavari
and Krishna district of Andhra Pradesh. "It may not be a
high yielding business like wealth management and third party
distribution, but it's a safe one, helps us meet our priority
sector lending targets and creates quality assets," says
Nayak.
| HOW IT STACKS
UP |
| DEPOSITS: 2.25
ADVANCES: 2
ATMS: 15
ELECTRONIC DATA CAPTURE (EDC): 14
DEBIT CARDS: 13
DEBT SYNDICATION: Largest player in India
for the last four years
Figures are percentage share of national market
WHERE THE REVENUES COME FROM
|
It is also aggressively expanding its geographical reach. Over the
next three years, the bank proposes to cover 450 cities, towns and
villages, up from 285 now. It is also the only private bank to roll
out branches in villages organically. And it is reaping the early
mover advantage. "If you are the first or the second private
sector bank to enter a district headquarters, your business grows
extremely fast," says Nayak. The plan for the future: more
of the same; "we will add 100-125 branches every year,"
he adds. That's not bad for a bank that started 13 years ago as
a wholesale bank focussed on corporate lending. "We expect
exponential growth in the retail segment, as a result of which the
share of wholesale banking will fall to 60 per cent in two years
(from 73 per cent now)," says R. Asokkumar, Executive Director
(Corporate Strategy), UTI Bank. "New streams of business like
wealth management, third party distribution, car loans and credit
cards will support our growth," adds Hemant Kaul, President
(Retail Banking), UTI Bank. Says Sejal Doshi, CEO, Finquest Securities:
"The bank is well-placed to take on competitors like ICICI
Bank and HDFC Bank. Given its strong fundamentals and the rapid
scaling up of its operations in new segments like corporate banking
and wealth management, UTI Bank will
easily continue to record higher double-digit growth in profitability."
|
CONSUMER BANKING |
| 5 YEARS BACK: 5 per cent
CURRENT: 27 per cent
EXPECTED IN NEXT 1-2 YEARS: 40 per cent
|
|
WHOLESALE BANKING |
| 5 YEARS BACK: 95 per cent
CURRENT: 73 per cent
EXPECTED IN NEXT 1-2 YEARS: 60 per cent
|
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"We will focus more
on the mid-market, SME and agri-business segments"
R. Asokkumar/Executive Director (Corporate Strategy)/UTI Bank |
Nayak and his team now want to muscle their way into lucrative
M&A advisory and financing space. "We have developed
expertise in the mid-market space in which we see huge potential,"
says Rajesh Tiwari, President (Credit), UTI Bank. The M&A
financing division of UTI Bank has already completed seven deals
that earned it a fee income of Rs 22 crore. "We are comfortable
with deals in the $5-100 million (Rs 22.5-450 crore) range and
are on the verge of completing four deals in the pharma, chemical,
mining and automotive components sectors," he says. Incidentally,
UTI Bank has held on to the #1 position in debt syndication for
the past four years. Says Asokkumar: "The corporate banking
pie will continue to grow, but we will focus more on the mid-market,
SME and agri-business segments." These now account for 31
per cent of the total revenues, but are expected to increase to
40-45 per cent within the next couple of years.
The bank is also betting big on fee-based income and is focussing
on offering premium services to its high net worth clients. It
has opened exclusive priority bank branches in Mumbai and Kolkata
and plans to roll this out nationally over the seven months.
Nayak is also eyeing opportunities abroad. "We want to
become a pan-Asian bank. Apart from remittances, we plan to expand
our reach by offering NRIs retail and wealth management services.
And we also plan to follow Indian corporates out of the country
and bag some of the financing opportunities that will emerge,"
he says.
That's quite a jam-packed agenda. But given its track record,
few will be betting on failure.
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