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UCO Bank jumps 16% after exit from PCA framework, BFSI News, ET BFSI

Banking & Finance

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New Delhi: Shares of UCO Bank rallied as much as 16 per cent during early trade on Thursday after the state-owned lender was put out of PCA watchlist.

The Reserve Bank of India (RBI) yesterday removed UCO Bank from its Prompt Corrective Action Framework (PCA) following improvement in various parameters and a written commitment that the lender will comply with the minimum capital norms.

Following the update, shares of UCO Bank zoomed 16 per cent to Rs 14.85, before trading at Rs 14.13 at 10 am. BSE Sensex was trading 105.71 points, or 0.18 per cent, lower at 58,144.55 at the same time. The scrip settled at Rs 12.81 on Wednesday.

“On a review of the performance of the UCO Bank, the Board for Financial Supervision on the basis of the published financial results for 2020-21 found that the bank was not in breach of the PCA parameter,” the RBI said in a statement.

The Kolkata-based lender has also provided a written commitment that it would comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis.

It has been under PCA since May 2017. The restrictions disable banks in several ways to lend freely and force them to operate under a restrictive environment that turns out to be a hurdle to growth.

Santosh Meena, Head of Research, Swastika Investmart, said it is a very positive trigger for the bank as they can grow their business now.

UCO Bank has widely underperformed the broader market, gaining merely 10 per cent in the last one year compared to a 52 per cent rise in the benchmark index BSE Sensex.

“But there are a lot of concerns around smaller PSU banks,” cautioned Meena while advising investors to avoid this stock and focus on SBI from the PSU banking space which has huge potential to outperform.

UCO Bank had posted over a four-fold jump in its net profit to Rs 101.81 crore for the first quarter of the fiscal ended June 30, as bad loans fell significantly.

The lender trimmed its gross non-performing assets (NPAs) significantly to 9.37 per cent of the gross advances as of June 30, 2021, as against 14.38 per cent at June-end 2020. Its net NPAs were down at 3.85 per cent from 4.95 per cent.



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UCO Bank again urges Reserve Bank of India to consider taking it out of PCA

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The restructuring would be available to borrowers with exposure up to Rs 50 crore. In the last financial year, Uco Bank had restructured less than Rs 400 crore of retail and MSME loans.

State-run Uco Bank has again urged the Reserve Bank of India to consider taking it out of the the prompt corrective action (PCA) framework after posting full year profit for the last fiscal, its MD & CEO AK Goel said on Monday.

The RBI had initiated PCA for the Kolkata-based lender in May 2017 in view of high non-performing assets and negative return on assets. In the last financial year, the bank posted a full-year net profit of Rs 167.04 crore as against a whopping Rs 2,436.83 crore net loss during FY20. During FY19, net loss had stood at Rs 4,321 crore.

“We approached the RBI to consider taking the bank out of the PCA framework after declaring the fourth quarter results. The bank registered full-year profit. It has meet all the criteria for exiting PCA,” Goel said in a virtual press conference.

The lender had earlier approached the central bank on lifting the restrictions after it had posted a net profit during the last quarter of the financial year FY20. After making losses for several consecutive quarters, the bank had reported a net profit of Rs 16.78 crore for Q4FY20.

Last month, Uco Bank reported a nearly fivefold year-on-year jump in its net profit to Rs 80.03 crore for the fourth quarter last fiscal from Rs 16.78 crore for the same period of FY20. The lender showed a significant improvement in its asset quality during the fourth quarter as its NPAs in absolute terms fell 41% y-o-y at Rs 11,351.97 crore. Gross NPA ratio stood at 9.59%, while net NPA ratio was 3.94%.

On restructuring under the RBI’s new policy on loan recast, Goel said the bank already extended relief under Resolution Framework 2.0. to 2314 accounts, amounting `127 crore as on June 7. “We are expecting around Rs 1,000 crore of loans required to be invoked for restructuring by June itself. For the whole of the year the numbers may be more.” he added.

Banks and lending institutions can invoke restructuring under the proposed framework till September 30. The restructuring would be available to borrowers with exposure up to Rs 50 crore. In the last financial year, Uco Bank had restructured less than Rs 400 crore of retail and MSME loans.

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