Government of India ownership with track record of assistance provided:
UCO Bank, headquartered in Kolkata, is among the 14 banks nationalised in 1969. The Government of India (GoI) holds 95.39 percent stake in UCO Bank as on December 31, 2024, which is one of its largest shareholdings in any public sector bank. The bank has a pan-India presence through a network of 3263 branches of which 30 percent branches are in the eastern region of India and the balance are spread across other regions. UCO Bank has a moderate international presence with 2 overseas branches, one each in Hong Kong, Singapore and a representative office in Tehran, Iran. The bank plays a vital role in supporting the financial inclusion initiatives of the Government in the east and the north-eastern regions.
Acuité believes that GoI will continue to provide ownership benefit to UCO Bank given its fairly reasonable presence particularly in eastern region and its key role in the penetration of financial services and social development therein. The continued ownership of GoI coupled with timing and magnitude of ownership benefit will, nevertheless, be the key monitorables.
Healthy resource franchise in its area of operations:
UCO Bank has established presence in eastern region as depicted by 988 branches (30 percent of branch network) as on December 31, 2024. Further, the bank reported around 61 percent of its branches in the rural and semi-urban regions thereby facilitating the mobilisation of small ticket deposits. The CASA (Domestic) base stood at Rs. 1,00,530 Cr. (37.97 percent of the total domestic deposits) as on December 31, 2024 (Rs. 92879 Cr. (37.61 percent of the total domestic deposits) as on December 31, 2023. The bank’s CASA share continued to compare favourably with its peers among mid-sized public sector banks.
Acuité expects UCO Bank to benefit by way of a sovereign parentage, lower cost of funds on the back of its healthy resource profile.
Improvements in Asset Quality
The bank saw an improvement in asset quality with GNPA at 3.46 percent as on March 31,2024(4.78 percent as on March 31,2023). Acuité notes that this improvement in asset quality is also attributed by high write offs at Rs. 1938 Cr. during FY2024 (FY2023: Rs.2575 Cr.). Although the asset quality is at an improving trend, it still remains moderate as depicted by GNPA of 2.91 percent with a PCR (including technical write offs) of 96.16 percent as on December 31,2024. The Net NPA as on March 31, 2024 stood at 0.89 percent as against 1.29 as on March 31,2023. The Net NPA improved to 0.63 percent as on December 31, 2024. Acuité expects slippages to be lower compared to what the bank has witnessed in the past few years, leading to further reduction in GNPA and NNPA.
Further, while Acuité takes cognizance of improvement in the banks operating performance over the last few quarters, its profitability (ROA) annualised remains moderate at 0.79 percent during Q3FY25 which exposes the bank to asset quality shocks.
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| Moderate Earning Profile albeit improving
The Bank reported reduction in profits ( Profit after Tax) of Rs 1653.74 Cr. during FY24 as against Rs 1862.34 Cr. during FY23. However, the Bank reported significant improvements in profits of Rs 1792.53 Cr. during 9MFY2025 as against Rs 1128 Cr.during 9MFY2024. The Bank had Net Interest Income (NII) of Rs. 8101 Cr. during FY2024 (FY2023: Rs.7343 Cr.) and Rs.6932Cr. during 9MFY2025 as against NII of Rs. 5914Cr. during 9MFY2024. Accordingly, ROAA stood at 0.54 percent as on March 31,2024 as compared to 0.68 percent as on March 31,2023. However, the cost of funds has seen an increase from 4.63 percent during FY24 to 4.75 percent during 9MFY2025.
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