Tag: uco bank

UCO Bank likely to rejig loans worth ₹1,000 crore

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UCO Bank is likely to restructure retail and MSME loans to the tune of ₹1000 crore by June this year, under the Reserve Bank of India’s Resolution Framework 2.0.

According to Atul Kumar Goel, MD and CEO, UCO Bank, close to 2,314 accounts amounting to ₹127 crore have been restructured under the framework so far.

The Resolution Framework 2.0 was announced by the RBI on May 5 to help small borrowers tide over the impact of the second Covid-19 wave and State-level lockdowns.

“It is still premature to say what would be the actual amount of restructuring but it is likely to be more than last year. We had restructured personal loans amounting to ₹92 crore and MSME loans worth ₹281 crore last year,” Goel told newspersons at a virtual press meet on Monday.

Goel expects credit demand to pick up following unlocking in various States. The bank is hopeful of registering 7-10 per cent growth in credit during the current fiscal. It had posted a credit growth of around three per cent in FY21.

“I am hopeful that there will be a good demand for credit on account of unlocking in all states. We have witnessed a credit growth of around ₹2000 crore so far during the current fiscal,” he said.

PCA framework

UCO Bank is hopeful of coming out of RBI’s prompt corrective action (PCA) framework. Having complied with all key regulatory parameters during the quarter-ended March 31, 2021, the bank has written to the central bank urging it to consider withdrawing PCA.

PCA is triggered when banks breach certain regulatory requirements such as minimum capital, return on asset and quantum of non-performing asset.

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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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Central Bank, IOB may be taken up for privatisation, BFSI News, ET BFSI

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NEW DELHI: The Centre may sell its stake in Central Bank of India and Indian Overseas Bank (IOB) as part of its mega privatisation initiative unveiled in the Union Budget in February.

While the two banks have been recommended for disinvestment by government think tank NITI Aayog, Bank of India (BoI) may be a potential candidate for sale, sources familiar with the deliberations told TOI.

The proposal from the government think tank is being vetted by the disinvestment and financial services departments, ministry sources said. The exercise is part of a multi-stage process for finalising entities that are to be taken up for privatisation.

While NITI Aayog has been tasked with recommending the names, it is then reviewed by the inter-ministerial group of officers and subsequently by a group of ministers, before the Union Cabinet puts its seal of approval.

Sources in the department of investment and public asset management (Dipam), which handles the government’s asset sales programme, said it will examine the proposal with the department of financial services and discuss the legislative changes needed for the privatisation of the state-run banks. “The timeline will depend on the legislative changes required,” the sources added.

Besides, the issue will have to be discussed in detail with the RBI as the law and regulations provide a special dispensation for state-run entities in several areas.

The Cabinet recently cleared the decks for the sale of government stake in IDBI Bank, but sale of the Centre’s holding in the two staterun entities will break new ground as the Narendra Modi administration has embarked on an ambitious privatisation drive, which for the first time includes the financial services space.

The government is hoping to conclude the sale of IDBI Bank stake during the current financial year.

Among the dozen staterun lenders, NITI Aayog had set its eyes on the six entities that were not part of the merger initiative a few years ago and included Bank of Maharashtra, Punjab & Sind Bank and UCO Bank in addition to BoI, IOB and Central Bank.

It, however, was of the view that the better off entities would attract greater interest, resulting in the shortlisting of IOB and Central Bank. Based on the current share price, the two entities are together valued at around Rs 44,000 crore with IOB’s market cap estimated at Rs 31,641 crore.



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UCO Bank Q4 net jumps nearly fivefold to Rs 80 crore

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The bank, in a stock exchange filing, informed that its board of directors approved the proposal for raising of equity capital aggregating to Rs 3,000 crore through various modes such as FPO, QIP and preferential issue, subject to necessary regulatory approvals.

State-run UCO Bank on Thursday reported a nearly five-fold year-on-year jump in its net profit to Rs 80.03 crore for the fourth quarter of FY21, from Rs 16.78 crore in the same period previous fiscal, as its operating profit grew 26% y-o-y.

The lender, which is still under the Reserve Bank of India’s Prompt Corrective Action framework, showed significant improvement in its asset quality during Q4 as its NPAs in absolute terms fell 41% y-o-y to Rs 1,1351.97 crore. The NPA ratio stood at 9.59%, which was 718 basis points down y-o-y. The gross NPA ratio decreased 21 bps on a quarter-on-quarter basis from 9.80%.

The bank, in a stock exchange filing, informed that its board of directors approved the proposal for raising of equity capital aggregating to Rs 3,000 crore through various modes such as FPO, QIP and preferential issue, subject to necessary regulatory approvals. The capital adequacy ratio stood at 13.74% (under Basel III), with the common equity tier-I ratio at 11.14% as on March 31.

Talking to FE, MD & CEO AK Goel attributed the sharp rise in the net profit to significant rise in operating profit, interest income and non-interest income.

Operating profit stood at Rs 1,532.54 crore, against Rs 1,216.60 crore for the same period a year ago. Net interest income rose 12.6% y-o-y to Rs 1,412.60 crore, while non-interest income saw an over 78% y-o-y growth to Rs 1,370.43 crore.

Total advances stood at Rs 118,404.81 crore as on March 31, 2021, against Rs 114,961.44 crore as on March 31, 2020, registering a growth of 3%. At the end of Q4FY21, net interest margin stood at 2.70, 12 bps up from 2.58% in same period of FY20.

The provision coverage ratio increased to 88.40% as on March 31, from 85.46% in the year-ago period. The provision for NPAs declined by 29.33% y-o-y at Rs 769.81 crore, against Rs 1,089.26 crore during Q4FY20.

During Q4, the lender’s fresh slippages stood at around Rs 2,449 crore. “Fresh slippages came primarily from retail, agriculture, MSME and large corporate,” Goel said.

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UCO Bank profit surges 371% to ₹80 cr in March quarter

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Riding on the back of a higher net interest income and other income, UCO Bank registered 371 per cent growth in net profit at ₹80 crore for the quarter ended March 31, 2021, as against ₹17 crore during the corresponding quarter last year.

Net interest income grew by 13 per cent at ₹1,412 crore during the quarter under review as against ₹1,254 crore, while other income increased by 78 per cent at ₹1,370 crore (₹769 crore).

The bank registered a net profit of ₹167 crore for the year ended March 31, 2021, as against a net loss of ₹2,437 crore in 2019-20.

Total provisions during the quarter increased by 49 per cent at ₹1,783 crore (₹1,193 crore). Provisions for non- performing assets (NPA), however, witnessed a decline at ₹770 crore (₹1,089 crore).

The percentage of gross NPA to advances declined to 9.59 per cent (16.77 per cent), while net NPA came down to 3.94 per cent (5.45 per cent).

The bank had fresh slippages of around ₹2,449 crore during the March quarter, primarily coming from retail, agriculture, MSME and large corporate. During the quarter ended March 31, 2021, the bank has reported 28 borrowal accounts as frauds involving a total amount of ₹1,238 crore, the bank said in a notes to account to BSE on Thursday.

The bank’s scrip closed at ₹13.30, up by 2.54 per cent on the BSE on Thursday.

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PSBs are on an upswing, but have they really buried the past?, BFSI News, ET BFSI

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The stock market has turned bullish on public sector banks amid growing expectations that their asset quality woes have hit the trough.

The State Bank of India results announcing a reduction in bad loan pile has fuelled the euphoria. But experts say public sector banks are still wobbly despite the outlook as Covid stress has brought renewed challenges for them.

What’s up?

Traders have mounted derivative bets on state-owned banks encouraged by the recent run-up in share prices. The outstanding positions in futures contracts of public sector lenders such as SBI,

Punjab National Bank and Bank of Baroda have shot up, especially after strong March quarter results from SBI last week.

The open interest in Bank of Baroda futures by number of shares is at a lifetime high and in SBI it is at the highest since September 2020. SBI shares touched a lifetime high of Rs 427.70 on February 18 this year are near that mark.

Nifty PSU Bank index gained 2% to close at 2,398.15 on Monday, with Punjab National Bank, Central Bank and Union Bank and SBI gaining 2-5%.

In the ongoing May series, SBI’s shares are up 14.6% while Bank of Baroda’s shares have risen nearly 22%. Punjab National Bank’s shares are up 13.5% during the same period.

The red flags

While the banks have cleaned up their books, mostly on the basis of write-offs, and posting robust numbers they may be staring at a renewed stress.

Banks are facing greater stress in smaller towns, more so the public sector banks as they have a bigger presence there.

The special mention accounts of public sector lenders are increasing, showing a rise in new stress as Covid buffets smaller businesses.

SBI’s SMA accounts where repayments are overdue more than a month totalled Rs 11,500 crore, while Bank of Baroda and Punjab National Bank had also reported build-up of these accounts for the December quarter during in QIP documents.

Credit growth has been falling for the last few years and totalled 5.58% for FY21 as against 6.02% for FY20. This credit growth is mostly cornered by the private banks, with PSBs seeing a sharper fall in credit growth

While PSU banks have reduced their bad loan pile mostly through write-offs, the recovery from such accounts is abysmal at less than 30%. In FY20, about 25% bad loans were written off. SBI wrote off Rs 32,000 crore in FY21, which is 23% of its total bad loans.

Comparison with private lenders

PSU bank shares have mostly been underperformers vis-à-vis their private-sector peers in the past decade because of high nonperforming loans (NPLs) and loss of market share. The superior performance by private sector banks pushed their valuations to record levels.

The Nifty PSU Bank index is down 11.6% in the past three years, while the Nifty Private Bank Index is up 23%. The Nifty index is up 43.1% in the same period.

PSU banks including Bank of India, Punjab National Bank, Bank of Baroda and UCO Bank among others are trading at a Price to Book (P/B) of around 0.55-0.7 times. SBI is trading at P/B ratio of 1.6 times.

In comparison, private lender HDFC Bank is trading at 4.1 times and Kotak Mahindra Bank at 5.5 times.



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Wilful defaults near Rs 2.5 lakh crore mark during pandemic, BFSI News, ET BFSI

Banking & Finance

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Banks have tagged 662 borrowers with loans of Rs 38,976 crore as wilful defaults during the last calendar year.

With this, the total wilful defaults have reached Rs 244,602 crore from 12,917 accounts as of December 2020, from Rs 205,606 crore from 12,255 accounts in December 2019, according to a report.

While wilful defaults have doubled since 2017, the recovery from top borrowers remains negligible.

The country’s top 100 wilful defaulters owe Rs 84,632 crore to banks as of March 2020, with the top 10 including Winsome Diamonds & Jewellery and accounting for 32% of it, data from the Reserve Bank of India shows. While banks wrote o nearly three-fourth of it to clean their balance sheet and get tax benefits, the default borrowers continue to appear in RBI‘s internal CRILC database till they clear the default.

Top 100 wilful defaulters

The total size of the top 100 wilful defaults rose 5.34% in FY20 from Rs 80,344 crore as of March 2019.

Mehul Choksi-owned Gitanjali Gems topped the wilful defaulters’ list with Rs 5,693 crore dues, followed by Jhunjhunwala brothers’ REI Agro with Rs 4,403 crore and Jatin Mehta’s Winsome Diamonds & Jewellery with Rs 3,375 crore.

The top 10 wilful defaulters include another jewellery maker Forever Precious Jewellery, and Vijay Mallya’s Kingfisher Airlines Punjab National Bank had the highest exposure to Gitanjali Gems with Rs 4,644 crore of non-performing assets (NPA) as on March 2020. PNB also had Rs 1,447 crore exposure to Gili India and Rs 1,109 crore to Nakshatra Brands.

Write-offs

State Bank of India had Rs 1,875 crore dues from top 10 wilful defaulter ABG Shipyard with the bank writing o the entire amount. Uco Bank had Rs 1,970 crore exposure to REI Agro with half of it being written off.

Write-offs are accounting entries for shifting NPAs from active balance sheet to off-balance sheet accounts. These are backed by 100% provision and therefore any recovery from these accounts adds to net profit.

RBI collects credit data from banks monthly, with data on defaults being collected on a weekly basis. The regulator has mandated banks to provide fully against NPAs older than four years and allowed to write these old NPAs.

The reduction in NPAs during FY20 was largely driven by write-os, RBI had said in its report on Trend & Progress of Banking in India. Banks’ total gross NPA reduced to 8.2% at the end of March 2020 from 9.1% a year earlier.



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IOB, Central Bank privatisation bid runs into RBI hurdle, BFSI News, ET BFSI

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The Reserve Bank of India (RBI) is likely to delay regularising struggling state-run lenders that are under the prompt corrective action (PCA) framework as it has reservations over their capital adequacy levels.

This may derail the privatisation prospects of Indian Overseas Bank and Central Bank, which are reported to be among the four banks shortlisted by the government for privatisation.

Indian Overseas Bank (IOB), UCO Bank and Central Bank of India are currently under the stringent PCA of RBI.

The RBI objection

In FY21, the government infused Rs 20,000 crore in ve banks through the instruments. Central Bank of India was the biggest beneficiary with Rs 4,800 crore, followed by Indian Overseas (Rs 4,100 crore), UCO Bank (Rs 2,600 crore).

However, the RBI has raised questions over the government’s bank capital infusion programme through non-interest-bearing bonds, according to a report.

The RBI reasons that capital infusion through bonds cannot be taken at face value and, therefore, these banks may still be short of regulatory capital, they said. In such a situation, they will continue under the PCA framework. Under the PCA regime, business restraints are imposed on struggling banks until they regain health.

The government went ahead despite RBI’s initial reservations and now the regulator has expressed serious concerns. The entire fund infusion through such bonds will then not count toward regulatory capital.

RBI is not inclined to pull these lenders out of the PCA framework based on such capital infusion and may further direct lenders to recalculate their capital adequacy ratio based on the actual value of the bonds.

The PCA status

All three banks under PCA Indian Overseas Bank, UCO Bank and Central Bank have reported net non-performing assets (NPAs) below levels that trigger PCA. However, on the proforma net NPA front, Central Bank falls short as its NNPA is 6.58% against the 6% required to be out of PCA.

Even after PCA exit, these banks may still be under RBI watch. In the case of IDBI Bank, which has committed to comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis, RBI has said the lender would be under continuous monitoring. “It has been decided that IDBI Bank be taken out of PCA framework, subject to certain conditions and continuous monitoring,” RBI had said.

Privatisation bid

Four banks on the privatisation shortlist included Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India.

Two public sector banks and one general insurance company are expected to be disinvested this year in addition to the divestment of IDBI Bank, Finance Minister Nirmala Sitharaman had announced during Budget presentation last month.

Bringing the banks out of PCA could boost their valuations in the event of privatisation.



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Capital infusion won’t raise tangible equity of privatisation bound banks, BFSI News, ET BFSI

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The government’s recent proposal to infuse capital in four state-owned banks through non-interest-bearing (zero coupon) bonds will improve the lenders’ capital levels, but not their tangible equity to a large extent.

The government notified that it has infused Rs 14,500 crore into four banks – Bank of India, Indian Overseas Bank, Central Bank of India and UCO Bank.

Indian Overseas Bank and Central Bank of India are reportedly among the four PSBs that are proposed to be privatised this year.

Zero-coupon bonds

A zero-coupon bond is a bond that pays no interest and trades at a discount to its face value.

Issued at a deep discount to the face value, these bonds are non-interest bearing, which means it is an investment that does not earn any returns, but depreciates in value over the years.

As these special bonds are non-interest bearing and issued at par to a bank, it would be an investment, which would not earn any return but rather depreciate with each passing year.

The bonds–with a tenure of 10-15 years–can be held by banks in the held-to-maturity category, insulating them from the impact of marked-to-market valuations.

Weak buffers

The agency said these long-tenure securities would be factored at par value rather than the discounted value in the banks’ balance sheet.

According to the agency, the four lenders have weak tangible buffers or a weaker ability to build and maintain capital buffers.

“Ind-Ra believes the intrinsic net worth of these instruments could be lower by more than 50% at the outset than similar maturity government papers in the market. The illiquid, non-trading nature of these securities could add to the discount,” it said in a release.

Tangible common equity is a measure of physical capital, used to evaluate banks’ ability to deal with losses. The long-tenor securities would be factored in at the face value and not the discounted value in the banks’ balance sheet.

Equity level

It said the proposed quantum of capital infusion varies between 11 per cent and 44 per cent of the tier-I capital of the respective PSBs as of the third quarter of the financial year 2020-21.

Equity level is an important factor in the banks’ ability to service Basel-III additional tier-I and tier-II bonds, it said.

“While the quantum of these instruments is limited in the total equity profile of most of these PSBs, the notching down for their tier-II bonds and additional tier-I bonds from the long-term issuer ratings and the standalone rating, respectively, could widen,” it said.

The first capital infusion through non-interest-bearing bonds was in Punjab and Sindh Bank (P&SB) in the third quarter of the financial year 2020-21.

The government has already allocated Rs 20,000 crore for equity infusion into PSBs in their Union Budget 2021-22.

The agency said it will continue to closely track these infusions and their impact on the banks’ franchise, adjusted networth and book value, it said.

The capital infusion

On Wednesday, the government infused Rs 4,800 crore into Central Bank of India, Rs 4,100 crore into Indian Overseas Bank, Rs 3,0000 crore into Bank of India, and Rs 2,600 crore into UCO Bank. The first such infusion was of Rs 5,500 crore in Punjab & Sind Bank in December.



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