UCO Bank — Q3 FY25 earnings call

Call held 21 Jan 2025

Management summary

UCO Bank delivered a robust Q3 FY25 performance, characterized by outperformance across all key guidance parameters. The bank saw strong credit growth led by the RAM (Retail, Agri, MSME) segment and significant improvements in asset quality and margins. Management expressed high confidence in surpassing annual targets, supported by a successful digital transformation under 'Project Parivartan' and a healthy recovery pipeline.

Highlights

  • Net Profit grew 27.04% YoY to ₹639 crore, while Operating Profit surged 41.73% to ₹1,586 crore.

  • Global NIM improved to 3.17%, surpassing the full-year guidance range of 3.00-3.10%.

  • Asset quality significantly improved with GNPA at 2.91% (down 94 bps YoY) and NNPA at 0.63% (down 35 bps YoY).

  • Credit growth stood at 16.44% YoY, exceeding the management's guidance of 12-14%.

  • CASA ratio maintained at 37.97%, showing resilience despite industry-wide deposit pressures.

  • Recovery from written-off accounts reached ₹710 crore in Q3, aided by a large infrastructure account resolution.

  • Capital Adequacy (CRAR) remains healthy at 16.25%, expected to reach 17.5% including nine-month profits.

Key financials

  1. Net Profit ₹639 Cr +27%YoY
  2. Operating Profit ₹1,586 Cr +41.7%YoY
  3. Global NIM 3.2% +2.3%QoQ
  4. GNPA 2.9% -24.4%YoY
  5. NNPA 0.63% -35.7%YoY
  6. CRAR 16.3%

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

SegmentGrowthNPA Ratio
Retail31%0.74%
Agriculture20%11.7%
MSME12.8%5.8%
Corporate14%—

Guidance & targets

Volume

  • Credit Growth Volume · FY25 · High confidence 14%

    Previously 12-14% → 14%

    So, our guidance is 14%. Guidance now looks to be on a conservative basis. We will definitely surpass the guidance going by the current trend.

    — Mr. Ashwani Kumar, MD & CEO

Other

  • Recovery Target Other · FY25 · High confidence ₹3,000 crore
    We have given a guidance around 3000 crore of recovery in this financial year out of which around 2700 crore has already been recovered in nine months.

    — Mr. Ashwani Kumar, MD & CEO

  • GNPA Other · FY25 · Medium confidence < 2.80%

    Previously < 3.00% → < 2.80%

    So if everything goes right then we will further reduce it from 2.90, maybe 2.80 or something like that.

    — Mr. Ashwani Kumar, MD & CEO

Market Share

  • CASA Ratio Market Share · FY25 · Medium confidence 37-38%
    CASA ratio continues to be around 37 to 38%. And that was our guidance also, that it will be our endeavour.

    — Mr. Ashwani Kumar, MD & CEO

Market context

  • Global NIM Margin · FY25 · High confidence 3.00-3.10%
    So, our guidance continues to be 3 to 3.10, but we will continue to work in improvement of our NIM on a quarter-on-quarter basis.

    — Mr. Ashwani Kumar, MD & CEO

Risks & concerns

  • High Agriculture NPA

    medium

    Agriculture NPA ratio remains high at 11.70%, though it has improved from 14.44% YoY.

    Management acknowledged

  • Slippages across segments

    low

    Management noted that slippages are not lopsided but occur across retail, agri, MSME, and corporate segments.

    Management acknowledged

  • MTNL Resolution Delay

    low

    Final resolution plan for MTNL is yet to be agreed upon by the Joint Lenders Meeting (JLM).

    Both acknowledged

Areas of evasion (1)

  • Declined to name the specific infrastructure account that provided the large recovery.

Q&A highlights

3 direct
Recovery from written-off accounts Direct
That is from infrastructure sector... There are 2-3 accounts. And one we were expecting in this Q4, but it came in Q3.

Explains the sharp jump in non-interest income and confirms that lumpy recoveries are driving the current outperformance.

Asked by Mr. Ashish

Equity dilution and QIP plans Direct
What we have approached to the government is for approval of QIP, which we have got the approval in previous quarter... hopefully, any time after these results, we'll come for QIP.

Confirms the bank is actively pursuing a QIP to meet SEBI norms and support growth, providing a timeline for potential dilution.

Asked by Mr. Sushil Choksey

Exposure to MTNL Direct
But to share with you, we are 100% provided for in that account itself in this quarter.

De-risks a major concern regarding telecom sector stress by confirming full provisioning, meaning any future resolution will be pure profit.

Asked by Mr. Sushil Choksey

2 min read 5 chapters

Detailed narrative

Guidance Outperformance Across Metrics

UCO Bank has successfully met or exceeded almost all guidance parameters set at the beginning of the year. Credit growth of 16.44% significantly outpaced the 12-14% target, while Global NIM at 3.17% beat the 3.00-3.10% range. Asset quality targets were also surpassed, with GNPA at 2.90% and NNPA at 0.63% already meeting year-end goals. Management now views its original 14% credit growth target as conservative and expects to surpass it by the end of FY25.

Asset Quality and Recovery Momentum

The bank's asset quality trajectory remains positive, with slippage ratio improving to 0.92% in Q3. A key driver of profitability was the recovery of ₹710 crore from written-off accounts, primarily from a large infrastructure account resolution that was pulled forward from Q4. The bank has already achieved ₹2,700 crore of its ₹3,000 crore annual recovery target in just nine months. Furthermore, the bank is 100% provided for its MTNL exposure, mitigating future downside risks.

Digital Transformation via Project Parivartan

Digital adoption is accelerating under 'Project Parivartan,' with active mobile banking users growing 97% YoY to 38 lakhs. The bank has digitized 9 out of 25 planned customer journeys and crossed ₹7,000 crore in digital liability business. WhatsApp banking users surged 304% YoY, and the bank is now implementing 'Tab Banking' across all branches to drive quality CASA acquisition. Management expects digital channels to contribute significantly to both asset and liability growth in the coming quarters.

Strategic Focus on RAM and Green Financing

The bank maintains a healthy RAM (Retail, Agri, MSME) mix of 62.36%, with retail growth particularly strong at 31.01%. Within retail, vehicle loans grew 51.93% and home loans 19.36%. UCO Bank is also pivoting toward sustainability, with a renewable energy portfolio of ₹3,700 crore and the launch of 'Green Deposit' schemes. Management plans to continue enhancing its green financing portfolio through specialized credit rating products and EV-focused lending.

Capital Raising and Expansion Plans

To support future growth and comply with SEBI public shareholding norms, UCO Bank has received government approval for a QIP. The bank has already selected merchant bankers and legal counsel and is meeting with investors, with the QIP likely to launch after the Q3 results. Additionally, the bank is on track with its branch expansion plan, having opened 82 of the 130 targeted branches for the year, with the remainder expected by March 2025.

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