UCO Bank Q4FY24: PAT down 9.5% YoY to Rs 526 cr due to higher provisioning

The bank's net profit for the entire fiscal year declined to Rs 1,654 crore from Rs 1,862 crore in the previous fiscal year.

Net Interest Income (NII) for FY24 stood at Rs.8101 crore registering a growth of 10.32% on the y-o-y basis as against Rs.7343 crore for the twelve months ended 31.03.2023.

During the period the bank said it showed consistent growth where the total business grew by 9.50% y-o-y to Rs 450007 crore and 3.34% from Rs. 435456 crore q-o-q.

Its gross advances increased by 15.62% y-o-y to Rs. 186877 crore and 4.29% from Rs. 179195 crore q-o-q. Total deposits grew by 5.53% y-o-y to Rs 263130 crore 2.68% from Rs. 256261 crore q-o-q.

Regarding advances in Retail, Agriculture & MSME (RAM) Sectors, the banks said the RAM segment increased by 13.88% y-o-y to Rs 97516 crore while there was a growth of 4.05% from Rs 93720 crore q-o-q backed by 14.62% y-o-y growth in retail advances, 13.16% y-o-y growth in agriculture advances and 13.53% y-o-y growth in MSME advances.

Retail Advances stood at Rs.40161 crore as on the quarter ended March 31, 2024, as against Rs.35039 crore as on 31.03.2023 registering a growth of 14.62% on a y-o-y basis, fuelled by home loan and Vehicle loan portfolio which registered a growth of 21.23% and 31.24% respectively on y-o-y basis.

Agriculture Advances stood at Rs.24641 crore as on 31.03.2024 as against Rs.21775 crore as on 31.03.2023, showing a growth of 13.16% on a y-o-y basis.

Advances to the MSME sector stood at Rs.32714 crore as on 31.03.2024 as against Rs.28815 crore as on 31.03.2023, registering a growth of 13.53% on a y-o-y basis.

The bank reported a reduction in NPA with asset quality improvement depicted by a reduction in Gross NPA by 132 bps to 3.46% by 39 bps from 3.85% q-o-q and net NPA reduction by 40 bps to 0.89% (by 9 bps from 0.98% q-o-q)) as on 31.03.2024.

Capital Adequacy Ratio (CRAR) improved by 47 bps to 16.98 % as on 31.03.2024 wherein Tier I Capital Ratio improved by 58 bps to 14.54% as on 31.03.2024 on y-o-y.

The bank’s Operating Profit for the twelve months stood at Rs 4576 crore showing an increase of 5.43% y-o-y basis as against Rs.4341 crore. The same has increased by 13.74% q-q from Rs 1,119  crore to Rs 1,273 crore.

Credit to Deposit Ratio registered an improvement of 620 bps to 71.02% on a y-o-y basis.

After a gap of nine years, the bank’s board has recommended a dividend of 28 paise per share.

Business per employee improved to Rs.20.93 crore during Q4FY24 as against Rs.18.90 crore for the same period of the preceding year.

Here are the highlights from the UCO Bank's press conference on Tuesday

Drop in PAT

UCO Bank MD & CEO Ashwani Kumar said the staff expenses increased by Rs 500 crore in Q4FY24 because of increased salaries. The bank made a provision of around Rs 277 crore in the last quarter for wage revision, he said. With this quarter the wage revision has been completed and paid but the bank has to make provisions for pension and gratuity, leading to the rise in operating expenses in this quarter.

Spending on IT

UCO Bank MD & CEO said the bank has planned to spend Rs 1000 crore, compared to around Rs 700 crore in FY24, in strengthening IT infrastructure and associated resources. This will include an upgrade of various servers, integrated treasury solution, digitalization of treasury, integration of transactions taking place across various verticals and transaction monitoring, and introduction of cyber security solutions. He said the spending on IT can be recovered through reduced costs per transactions, acquiring new customers, loan sanctions, improved recovery, and follow-up mechanisms.

The IT spending will also allow the bank to cover unserved customers and improve profitability. He also stated that cross-selling products through digital modes as another means to recover money spent on IT. He added that improved IT will allow the bank to make indirect savings in various costs.

IMPS glitch

Kumar said the bank is regularly updating RBI about the steps we have taken against such events in the future and all the checks and balances have been put in place. He said NPCI is satisfied with the bank’s measures and allowed the lender to go live gain on IMPS.

Initially, the bank was able to recover 679 crore and now this figure has reached Rs 728 crore. Subsequently, he added, there was an additional recovery of Rs 50 crore and some recovery is done almost daily.

“The pace of recovery has come down as some customers are not paying the funds but the bank has fully provided for these customers. We have also lodged FIR in this incident and law enforcement agencies are already probing the incident,” he said, adding that no wrongdoing has been found behind the erroneous transfer of Rs 820 crore to various bank accounts.

Recovery slump

The UCO Bank MD & CEO said the recovery was lower in Q4FY24 compared to the previous quarter owing to the resolution of a large NBFC account in Q3FY24. He added that the bank is setting up recovery clusters to target the recovery of written-off accounts from the field level.

Fundraising

“The bank’s capital adequacy ratio is around 17% and looking at our growth we don’t need any further capital induction for the growth part,” Kumar said. However, the board has approved the issuance of equity for a face value of Rs 4000 crore to bring down the government stake in UCO Bank from 95% to 75%.

No date has been fixed for the fundraiser and it will be in tranches and in different modes, he added.

Loans

The bank's corporate loan book has shown better performance than RAM, the UCO Bank MD& CEO said. He said there is increased activity in sectors like power, road, ports, textile, basic metals as well as ethanol projects.

Going forward, the bank is expecting an overall growth of 10-14% with every sector likely to follow the same trajectory. This quarter, the bank’s NBFC exposure has gone down, while other sectors have surged. He added that the bank is looking at 3-4% growth sequentially in its corporate loan book.

Branch expansion

The UCO Bank board has already approved the opening of 130 branches in FY25 and location approval for around 20 branches has been already given. He said the location approval for the remaining 110 branches is likely to be given in this quarter so that all the branches can be operational in this fiscal. At present, the bank has 3,230 plus two overseas branches.

Declining operating profit

The y-o-y decline in operating profit is due to higher provisioning for pension and gratuity in view of the recent wage revision approved by the government, Kumar said.

Guidance on NIM

The bank has already achieved 2.9-3% last fiscal and targeting the same this financial year, he said.

Slippages

Fresh slippages stood at Rs 476 crore in the January-March quarter of FY24 across segments. It stood nearly the same compared to the corresponding period last year. For FY24, the slippage ratio stood at 1.10%.

Total provisioning

For the entire FY24, UCO Bank made provisioning of Rs 2,922 crore, of which Rs 1,068 crore was provisioned for NPAs, Rs 915 crore for Deferred Tax Assets, Standard Asset was Rs 200 crore and LPI and others 733 crores.