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.