UCO Bank - Asset Quality Worsens

UCO Bank announced its March 2013 quarter results that are much below the street estimates. While the operating profit for the March 2013 quarter stood at Rs 1032.32 crore as against Rs 830.74 crore in December 2012 quarter and Rs 728.12 crore in March 2012, The bottomline got impacted on Account of higher provisioning. For the March 2013 quarter the provisioning stood at Rs 976.66 crore as against Rs 727.64 crore and Rs 456.09 crore in December and March 2012 quarters respectively.

With higher provisioning the bottomline for the March 2013 quarter stood at Rs 49.55 crore. This was much lower as compared to Rs 102.47 crore in December 2012 and Rs 252.84 crore in March 2012. The asset Quality of the company has also taken a beating where the Gross NPAs increased to Rs 7130.09 crore as against Rs 6711.29 crore in December 2012. Despite the higher provision the Net NPAs increased to Rs 4069.31 crore from the levels of Rs 3927.00 crore in December 2012.

In percentage terms the Gross NPAs for the March 2013 stood at 5.42 per cent (5.53 per cent in December 2012 and 3.48 per cent in March 2012). The Net NPAs stood at 3.17 per cent as against 3.32 per cent and 1.96 per cent in December and March 2012 respectively.

On the segmented performance it was the corporate and wholesale banking that impacted the overall performance. It is clearly visible from the fact that this Segment posted a loss of Rs 201.84 in March 2013 as against Rs 56.74 crore in December 2012. It was the treasury department which saved the day for the bank.

We are of the opinion that the results have not been up to the expectations and hence it would be good for the investors to avoid the counter at current levels. As the scrip prices witness a fall, one can accumulate at lower levels.