UCO Bank Shares Bleed, Post Q3FY13 Numbers

UCO Bank disappointed the streets with its Q3FY13 numbers. The asset quality of the bank worsened significantly, coupled with a lower growth in the topline and bottomline were least expected by the market participants. The bank’s stocks bled down by 4.55% to Rs 68.2 per share, post this numbers. Following are the key financial parameters of the bank:

Asset quality of the bank further worsened in this quarter. Its NPA are among the highest in the industry. Gross and Net NPA of the bank increased substantially by 65 and 38 basis points to 5.53% and 3.32% on a sequential basis. It increased by 204 and 128 basis points on a YoY basis. Provision Coverage Ratio (PCR) also stands at 48.88%, way below the RBI guidelines of 70%.

Net Interest Margin (NIM) increased by 8 basis points to 2.32% on a sequential basis, while on yearly basis, it has declined by 57 basis points. Further, as on December 31, 2012, the Capital Adequacy Ratio (CAR) of the bank stands at 13.19% against 12.33% in the similar period last year. Return on Assets (ROA) of the bank also decreased considerably standing at 0.21% against 0.82% in the similar period last year.

On the segmental front, the bank’s Treasury segment performed decently, with its revenue growing by 10% to Rs 1013 crore, while Profit from the same grew by 82% to Rs 16 crore on a YoY basis. Revenue from the retail segment grew by 36% to Rs 996 crore, while Profit from the same declined substantially by 68% to Rs 24 crore on a YoY basis.

We believe that the bank posted a bad set of Q3FY13 numbers. On the valuation front, the bank is trading at a Price to Book value of 0.65x. Even though it is available at a cheaper valuation, we believe that there could be a potential downside on the counter. Looking at the December quarter numbers, we would advise our readers to stay away from the space as of now.