UCO Bank — Q1 FY26 earnings call

Call held 21 Jul 2025

Management summary

UCO Bank delivered a stable Q1 FY26 performance characterized by robust credit growth in the RAM (Retail, Agri, MSME) segments and continued improvement in asset quality. While Net Interest Margins (NIM) faced a slight compression of 4 bps due to front-ended repo rate cuts and the absence of one-time recovery bonuses seen in the previous quarter, the bank maintained strong profitability through non-interest income and cost control. Management remains confident in achieving 12-14% credit growth and crossing the 1% RoA benchmark by early FY27.

Highlights

  • Net Profit grew by 10% YoY to ₹607 crores, despite margin pressures from recent repo rate cuts.

  • Total advances increased by 16.48% YoY to ₹2,25,101 crores, exceeding the bank's full-year guidance of 12-14%.

  • Asset quality improved significantly with GNPA at 2.63% (down 69 bps YoY) and NNPA at 0.45% (down 33 bps YoY).

  • Net Interest Income (NII) rose 6.64% YoY to ₹2,403 crores, while non-interest income surged 20% to ₹997 crores.

  • CASA ratio stood at 36.91%, with management targeting a return to the 37-38% range.

  • Cost-to-Income ratio improved to 54.06% from 57.23% in the previous year, reflecting better operational efficiency.

  • Digital business crossed ₹8,000 crores in Q1 against a full-year target of ₹25,000 crores under Project Parivartan.

  • Capital Adequacy Ratio (CAR) remains strong at 18.39% with Tier-1 capital at 16.36%.

Key financials

  1. Net Interest Income ₹2,403 Cr +6.6%YoY
  2. Net Profit ₹607 Cr +10%YoY
  3. NIM Global 3% -4.2%YoY
  4. GNPA 2.6% -20.8%YoY
  5. NNPA 0.45% -42.3%YoY
  6. CASA Ratio 36.9%

What they filed

Q1 FY27: revenue up 8.7%, net profit up 8.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue6,078 6,220 6,745 6,436 6,537 +8%6,652 +7%6,656 −1%6,996 +9%
Net profit607 640 666 607 620 +2%740 +16%801 +20%656 +8%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • RAM (Retail, Agri, MSME)
    23.5% Growth63% Share of Total Advances
  • Retail
    30.7% Growth17.9% Housing Loan Growth66.9% Vehicle Loan Growth
  • MSME
    20.3% Growth₹368 Cr Slippages

Guidance & targets

Volume

  • Advances Growth Volume · FY26 · High confidence 12-14%
    So, we expect that we will be within our guidance of credit growth of 12 to 14% by the year end.

    — Mr. Ashwani Kumar, MD & CEO

  • Deposit Growth Volume · FY26 · Medium confidence 10-12%
    Deposit growth, we have given a guidance of 10 to 12%... we may have a slight cut in our deposit guidance, maybe after seeing the performance in the September quarter.

    — Mr. Ashwani Kumar, MD & CEO

Profitability

  • Return on Assets (RoA) Profitability · by Q1 or Q2 FY27 · Medium confidence 1%
    I believe that from next year, Q1 or Q2, we may see that we reach or cross at least 1% ROA.

    — Mr. Ashwani Kumar, MD & CEO

Margin

  • CASA Ratio Margin · FY26 · Medium confidence 37-38%
    And CASA, we have given a guidance of 37 to 38. We are marginally lower than 37... we expect that we may touch again 37%.

    — Mr. Ashwani Kumar, MD & CEO

Other

  • Slippage Ratio Other · FY26 · High confidence 1-1.25%
    And this year also we have kept a target of 1-1.25% only... I am confident that this will be achievable in this year.

    — Mr. Ashwani Kumar, MD & CEO

Risks & concerns

  • NIM Compression

    medium

    Global NIM declined to 2.96% due to front-ended repo rate cuts and repricing dynamics.

    Both acknowledged

  • MSME Slippages

    medium

    Slippages in the MSME segment were ₹368 crores, including one mid-corporate account of ₹137 crores.

    Analyst acknowledged

  • Current Account Decline

    low

    Management attributed the 8% decline in current accounts to corporate liquidity management at the end of the March quarter.

    Analyst downplayed

Areas of evasion (1)

  • Specific contribution of DSA vs branches in housing loan origination numbers.

Q&A highlights

2 direct
Profitability Lag and Recovery from Written-off Accounts Direct
The basic reason for interest income coming down in this quarter from advances was that Rs. 283 crores which was booked as an interest income last quarter on account of recovery from written off account, which was not available in this account.

Explains that the perceived dip in profitability is primarily due to a high base effect from a one-time large recovery in the previous quarter.

Asked by Mr. Ashok Ajmera

MTNL Exposure and Provisioning Direct
MTNL, we are giving… we are already having 100% provision in the MTNL account. So, there is no room left for MTNL account.

Confirms that the bank has fully insulated itself from potential losses in the stressed MTNL account (₹245 crores exposure).

Asked by Mr. Nitin Dharmawat

Capital Raising and QIP Plans Partial
We will be reaching out to the government also for giving their approval and once approval is received we will seize the opportune time. If required we may go for the best way to raise capital.

Indicates that while shareholder approval is in place, the bank is awaiting government clearance to dilute its 90% holding via QIP or OFS.

Asked by Mr. Sushil Choksey

2 min read 5 chapters

Detailed narrative

RAM Segment Drives Robust Credit Growth

UCO Bank's credit growth of 16.48% YoY was primarily fueled by the RAM (Retail, Agri, MSME) segment, which now constitutes 62.97% of total advances. Within Retail, vehicle loans saw an exceptional growth of 66.94%, while housing loans grew by 17.92%. Management emphasized that their MSME strategy is shifting toward mid-corporate accounts where yields are better, resulting in a 20.33% growth in that segment.

Asset Quality Resilience Despite MSME Slippage

The bank's GNPA improved to 2.63%, a decline of 69 bps YoY, while the Provision Coverage Ratio (PCR) reached a high of 96.88%. Although slippages for the quarter were slightly elevated at ₹631 crores, management clarified that ₹137 crores came from a single mid-corporate MSME account that was already on their watch list. The SMA-2 book (>₹1 crore) stands at a manageable 0.7% of total advances, providing comfort on future asset quality.

Digital Transformation via Project Parivartan

Under Project Parivartan, the bank has successfully digitized 22 customer journeys with 8 more in the pipeline to reach a target of 30 by September. Digital business for the quarter reached ₹8,000 crores, putting the bank on track to exceed its annual target of ₹25,000 crores. Mobile banking adoption has also surged, with active users crossing 51 lakhs, representing 38% of the registered user base.

Margin Pressures and Profitability Outlook

Global NIM compressed to 2.96% from 3.09% a year ago, impacted by a 22 bps decline in weighted average yield following repo rate cuts. However, the bank mitigated this through a 20% growth in non-interest income (₹997 crores) and a reduction in the cost-to-income ratio to 54.06%. Management expects RoA to cross the 1% threshold by the first or second quarter of the next financial year as credit costs continue to decline.

Capital Position and Strategic Initiatives

With a Capital Adequacy Ratio of 18.39%, the bank is well-capitalized for growth. Management is exploring various fundraising modes, including QIP or OFS, to reduce the government's 90% stake once regulatory approvals are secured. Strategic initiatives like the 'PULSE' alert monitoring system have improved the identification of mule accounts with an 88% success rate, enhancing the bank's cybersecurity and customer service framework.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Financial Services earnings calls