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Merill Lynch Bullish on UTI Bank

April 21, 2007

UTI Bank posted better than expected results during Q4 of FY07. UTI Bank’s 4QFY07 net income grew 40%yoy to Rs2.1bn, higher than estimates, led by strong operating profit growth (+63%yoy). Top line grew 48%yoy as loan growth sustained at +65%yoy led by corporate credit demand. Key highlights of results were a) margin expansion of 6bps qoq to 3.06% driven by increasing share of CASA and b) 59%yoy growth in fee income led by both retail (distribution of life insurance products, credit cards and rising client base) and corporate fees.

Merill Lynch forecasts earnings growth at 30% CAGR through FY09 (changed by <1%). Hence one year from now it could trade at 3.3x FY09E adj book, underpinning our PO of Rs600.

Fully Diluted EPS estimates for FY2008 and FY2009 are Rs 31.16 and Rs 39.90.

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