Markets React Negatively To UCO Bank’s Q1FY14 Results

One look at UCO Bank’s June 2013 quarter results will give you the impression that its bottomline has jumped 41% on a YoY basis to stand at Rs 511 crore. But this bottomline has been boosted by a MAT credit of Rs 147.40 crore. If we adjust this number, then the net profit of the bank comes down to Rs 363.71, which remained almost flat on a YoY basis. For the same quarter of the last fiscal, the bottomline had stood at Rs 362.46 crore.

On the other hand, the net interest income (NII) witnessed good growth of 30.77% on a YoY basis to stand at Rs 1364 crore for Q1FY14. The same had stood at Rs 1043 crore for Q1FY13.

On the asset quality front, the gross non-performing asset (NPA) remained elevated and increased marginally to 5.58% from 5.42% QoQ, but the net NPA remained flat at 3.15% from 3.17% during the corresponding period of the last fiscal. The capital adequacy ratio (CAR) as per Basel III was 13.44% for the quarter.

The markets have reacted negatively on the results as the bank closed the day at Rs 68.70 declining by 6.59% on the BSE. At this point, the stock trades at a price to book value of 0.71x. After adjusting for higher NPA, the stock still looks expensive and we hence advise investors to stay away from the stock.