Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- UCO Bank (BOM:532505, Financial) reported a significant growth in total business by 13.56% year-over-year, with deposits increasing by 10.57% and advances by 18%.
- The bank's operating profit for the quarter ended September 30, 2024, grew by 45.82% year-over-year, reaching INR 1,432 crore.
- Net profit saw a substantial increase of 50% year-over-year, amounting to INR 603 crore for the quarter.
- Net interest income for the quarter grew by 20% year-over-year, contributing to an improved net interest margin of 3.10% compared to 2.84% in the previous year.
- Asset quality improved with gross NPA reducing to 3.18% from 4.14% year-over-year, and net NPA improving by 38 basis points to 2.73%.
Negative Points
- The bank experienced higher slippage during the quarter, primarily due to one corporate account, impacting the overall slippage ratio.
- Despite improvements, the cost of funds increased by 32 basis points, which could pressure future margins if not managed effectively.
- Agricultural slippages were notably higher this quarter at INR 206 crore compared to INR 48 crore in the previous quarter.
- The bank's restructured book remains significant at INR 2,786 crore, with a substantial portion related to COVID restructuring.
- UCO Bank's overseas loan book has not grown due to insufficient margins, indicating potential challenges in expanding this segment.
Q & A Highlights
Q: How confident is UCO Bank in achieving its credit growth target of 14% for the year, given the current progress?
A: Ashwani Kumar, CEO and Managing Director, stated that the bank has grown around INR6,000 crore in each of the first two quarters. With the festival season and increased traction in home and vehicle loans, the bank is confident in achieving its 14% growth target. The current pipeline includes INR8,000 crore in sanctions, which supports this confidence.
Q: Can you provide insights into the recovery from written-off accounts and expectations for the coming quarters?
A: Ashwani Kumar mentioned that the bank had a good recovery this quarter and expects similar results in the next quarter, with a significant account expected to contribute. The total recovery for the half-year was INR1,100 crore, and the bank aims to maintain last year's full-year recovery of INR1,700 crore.
Q: What is the current status of UCO Bank's restructured book, and are there any buffer provisions?
A: The restructured book stands at INR2,786 crore, down from INR3,709 crore a year ago. The bank maintains the required provisions as per RBI guidelines and holds an additional INR530 crore for COVID restructuring. Overall, the bank has a buffer of approximately INR1,000 crore above the mandatory provisions.
Q: How is UCO Bank managing its CASA ratio and margins, and what initiatives are in place to maintain them?
A: The CASA ratio has been stable at 37-38% over the past 1.5 years. Initiatives include cab banking, revamped savings accounts, and resource teams at zonal levels. The bank has improved its net interest margin from 2.84% to 3.10% by rebalancing loan products and focusing on higher-yielding segments.
Q: What is the outlook for UCO Bank's digital transformation and its impact on future growth?
A: The bank has initiated Project Parivartan, aiming to digitize 25 journeys by March 2025. The transformation is expected to significantly benefit the bank next year, with digital balance sheet growth anticipated as awareness and adoption of digital products increase.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
