UCO Bank — Q3 FY26 earnings call

Call held 20 Jan 2026

Management summary

UCO Bank delivered a strong Q3 FY26, demonstrating robust business and credit growth, significant improvements in asset quality, and healthy profitability. The bank's strategic focus on RAM segments and digital transformation contributed to improved margins and efficiency. Capital remains well above regulatory requirements, supporting future growth, with management expressing confidence in meeting provisioning targets and maintaining NIM stability.

Highlights

  • Business growth of 13.25% YoY, backed by 10.64% deposit growth and 16.74% advances growth.

  • Net profit increased by 15.65% YoY to ₹739 crores, with operating profit growing 6% YoY to ₹1,680 crores.

  • Global Net Interest Margin (NIM) improved to 3.08% (from 3.03% last quarter), and domestic NIM to 3.27% (from 3.23%).

  • Gross NPA improved by 50 bps YoY to 2.41%, and Net NPA by 27 bps YoY to 0.36%, with PCR at 97.32%.

  • Capital Adequacy Ratio (CAR) is robust at 17.43%, rising to 18.67% including 9-month profit, and LCR maintained at 112%.

Concerns

  • Muted corporate credit growth due to pricing issues and a reduction in PSU exposure, leading to conservative overall credit growth guidance of 12-14%.

  • Geopolitical risks were acknowledged, but management stated the bank's direct export credit exposure to affected countries is limited to ~₹100 crore (5% of ₹2,000 crore total export credit).

Key financials

  1. Business Growth 0.133 decimal_fraction +13.3%YoY
  2. Deposit Growth 0.106 decimal_fraction +10.6%YoY
  3. Advances Growth 0.167 decimal_fraction +16.7%YoY
  4. CASA Ratio 38.4%
  5. Operating Profit ₹1,680 Cr +6%YoY
  6. Net Profit ₹739 Cr +15.7%YoY
  7. NII Growth 0.113 decimal_fraction +11.3%YoY
  8. Global NIM 3.1%
  9. Domestic NIM 3.3%
  10. Cost of Fund 4.5%
  11. Yield on Advances 8.1%
  12. Cost to Income Ratio 52.2%
  13. RoA 0.83%
  14. Fee Based Income Growth 0.3 decimal_fraction +30%YoY
  15. Gross NPA 2.4%
  16. Net NPA 0.36%
  17. PCR 97.3%
  18. Tangible PCR 85.5%
  19. Slippage Ratio 0.85%
  20. Total Slippages ₹419 Cr
  21. SMA-1 and 2 ₹858 Cr
  22. Corporate SMA-1 and 2 ₹316 Cr
  23. Total Recovery (9-months) ₹2,215 Cr
  24. Total Recovery (last 3 months) ₹383 Cr
  25. Business per Employee ₹26.12 Cr
  26. Business per Branch ₹166.32 Cr
  27. Overall Provision (forward looking) ₹1,252 Cr
  28. COVID Provision ₹530 Cr
  29. LCR 112%
  30. CAR 17.4%
  31. CAR (incl. 9-month profit) 18.7%
  32. Tier 1 Capital 15.4%
  33. CET1 15.2%
  34. CD Ratio 78.6%
  35. Digital Business Book ₹15,900 Cr
  36. NBFC Exposure ₹27,000 Cr
  37. MFI Exposure ₹500 Cr
  38. Gold Loan Portfolio ₹15,000 Cr
  39. Export Credit Exposure ₹2,000 Cr

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.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed LCR maintained at 112%. Capital Adequacy Ratio (CAR) at 17.43%, and 18.67% including 9-month profit.
    As far as LCR is concerned, 112 % LCR is maintained by the bank. These were all about the performance of the bank. ... capital adequacy ratio of the bank stood at around 17.43 %, with Tier 1 capital 15.41 % and CET1 at 15.18 %. If we include these 9 months profit also, then our capital adequacy ratio stood at 18.67 %.

Guidance & targets

Credit Growth

  • Overall Credit Growth Credit Growth · FY26 · Medium confidence 12-14%
    But on a conservative basis, we always keep our guidance 12 to 14% because in this current market though we are growing well in RAM but if you look at our corporate credit growth there is slight muted growth in the corporate segment. ... So, we expect that we will be achieving and surpassing that credit growth target also, but we will continue to keep our credit growth target of 12 to 14 %.

    — Mr. Ashwani Kumar

ECL Provisioning

  • Total ECL Provisioning ECL Provisioning · by June 2027 · High confidence ₹2,500-₹3,000 crore (total), ~50% built in
    See, if you look at our calculations which we have done, it should be in the range of ₹2,500 to ₹3,000 crore currently, as per our estimates. So, around 50 % of that, if I take a lower band of 2500, so 50 % of that we have already built in, right. And I expect, now we have still 5...6 quarters rather, because in June'27 we have to go live, right?

    — Mr. Ashwani Kumar

Government Shareholding

  • Government Shareholding Percentage Government Shareholding · High confidence 75%

    Previously 90.95% → 75%

    But nevertheless, we have to achieve the requirement of SEBI also by bringing down the shareholding of the government to 75 %.

    — Mr. Ashwani Kumar

Capital Raise

  • QIP Amount Approved Capital Raise · High confidence ₹2,700 crore
    We have taken approval of ₹2,700 crore from the board.

    — Mr. Ashwani Kumar

IT Expenditure

  • IT and Digital Spend IT Expenditure · next year · High confidence ₹800-₹1,000 crore
    I believe the next year because now majority of the projects which we thought of in last 3 years almost are nearing completion but still there is a lot of scope for further improvement and enhancement in our existing IT infrastructure also and I believe that next year also it should be in the range of ₹800-₹1,000 crore because many projects are still in pipeline...

    — Mr. Ashwani Kumar

Market context

  • Global Net Interest Margin (NIM) Profitability · next year · Medium confidence in the range of 3%
    I think the NIM should be in the range of 3% in the next year also.

    — Mr. Ashwani Kumar

What to watch in Q4 FY26

Overall Credit Growth

Next quarter (Q4 FY26)
Current 16.74% YoY (9-months ~11%)
Target Maintain or exceed 12-14% guidance

Why it matters

Key indicator of business expansion and market share gain, especially given conservative guidance.

But on a conservative basis, we always keep our guidance 12 to 14% because in this current market though we are growing well in RAM but if you look at our corporate credit growth there is slight muted growth in the corporate segment. ... So, we expect that we will be achieving and surpassing that credit growth target also, but we will continue to keep our credit growth target of 12 to 14 %.

Risks & concerns

  • Muted Corporate Credit Growth

    medium

    Corporate credit growth is muted due to pricing issues and a reduction in PSU exposure, impacting overall credit growth.

    Management acknowledged

  • Geopolitical Impact on Export Credit

    low

    Direct export credit exposure to countries affected by geopolitical issues is limited to ~₹100 crore (5% of total export credit).

    Management downplayed

Q&A highlights

7 direct
Credit Growth Target Revision Partial
But on a conservative basis, we always keep our guidance 12 to 14% because in this current market though we are growing well in RAM but if you look at our corporate credit growth there is slight muted growth in the corporate segment.

Analyst questioned conservative growth guidance despite strong performance, revealing management's cautious stance due to corporate segment challenges.

Asked by Mr. Ashok Ajmera

ECL Provisioning Quantum and Timeline Direct
See, if you look at our calculations which we have done, it should be in the range of ₹2,500 to ₹3,000 crore currently, as per our estimates. So, around 50 % of that, if I take a lower band of 2500, so 50 % of that we have already built in, right. And I expect, now we have still 5...6 quarters rather, because in June'27 we have to go live, right?

Provides specific estimates for total ECL and a clear timeline for completing provisioning, impacting future profitability.

Asked by Mr. Ashok Ajmera

Capital Raise and Government Shareholding Direct
But nevertheless, we have to achieve the requirement of SEBI also by bringing down the shareholding of the government to 75 %. So, we have already taken board approval, AGM approval, all approvals in place. At the right and opportune time, we will come to the market for QIP also. We have taken approval of ₹2,700 crore from the board.

Clarifies the bank's strategy to reduce government shareholding and the approved QIP amount, addressing future capital needs and regulatory compliance.

Asked by Mr. Ashok Ajmera

NIM Trajectory Direct
I think NIM will continue to be in this trajectory only because if you look at the pace of reduction in the deposit rate, that is not in line with the reduction in the Repo rate. Still deposit is at a very reasonably high rate, not at lower rate. So, I believe that the NIM should be in the range of this trajectory only going forward, in the next quarter.

Sets expectations for NIM stability in the near term, linking it to deposit rate dynamics.

Asked by Mr. Ashok Ajmera

Corporate SMA-2 Risk Direct
Yeah. The total is 511, SMA-2 is 316. See, it is not one or two account, there are few accounts which are in SMA-2. But if you look at the SMA-1 is 0. So, there are certain accounts which were there in SMA-0 they will come back to SMA-0. Because of some reason they have come to SMA-2. So, as per....... No, no, not. Into the NPA? Yes, yes.

Reassures that the corporate SMA-2 book is not chunky and is not expected to slip into NPA, mitigating asset quality concerns.

Asked by Mr. Ashok Ajmera

Future Digitalization Spend Direct
Going by the first question I think about the IT spend, IT and digital spend, this year we had kept a budget of around ₹1,100 crore and around ₹700 crores + is already spent. Next year; teams are already working for the plan for the next year. I believe the next year also it should be in the range of ₹800-₹1,000 crore because many projects are still in pipeline...

Outlines significant planned IT investments for the next year, indicating continued focus on digital transformation for efficiency and service enhancement.

Asked by Mr. Sushil Choksey

NBFC Exposure and Quality Direct
See, NBFC, if you look at our exposure is around ₹27,000 crore to NBFCs. It works out to around 12% of our total book, that is 27,000 crore. ... There is no slippage in those accounts except in MFI there was one slippage earlier but our overall MFI exposure is now only, I think, less than ₹500 crore. So, not even ₹440 crore. So, that is also under control.

Provides clarity on the bank's substantial NBFC exposure and reassures about its quality and controlled MFI segment.

Asked by Mr. Ashok Ajmera

Geopolitical Risk on Export Credit Direct
If I have to look at our banks' exposure, we have around ₹2,000 crore of export credit exposure and of which only 5% is in respect of countries where some tariff and all these things have happened. So, it is not a major one; around ₹100 crore of only exposure for the bank in those countries. So, not much of worry for the UCO Bank because our exposure to those countries is very limited.

Quantifies the bank's limited direct exposure to geopolitically affected regions, reducing concerns about external shocks.

Asked by Mr. Ashok Ajmera

3 min read 7 chapters

Detailed narrative

Robust Business and Credit Growth

UCO Bank reported a 13.25% YoY business growth, driven by a 10.64% increase in deposits and a significant 16.74% rise in advances. The RAM segment, comprising retail, agriculture, and MSME, was a key growth driver, expanding by 25.86%, with retail advances growing 28.18% and vehicle loans surging by 73%. The bank's CD ratio improved to 78.56% in December 2025 from 65% in March 2023, indicating efficient deployment of funds.

Improved Profitability and Margins

The bank's operating profit increased by 6% YoY to ₹1,680 crores, leading to a net profit of ₹739 crores, a 15.65% YoY growth. Net Interest Income (NII) grew by 11.27% YoY, and the global Net Interest Margin (NIM) improved to 3.08% from 3.03% in the previous quarter. The cost of funds decreased by 27 basis points to 4.48%, while the yield on advances stood at 8.06%, contributing to better profitability. The cost to income ratio also saw a significant reduction of 330 bps YoY, reaching 52.20%.

Enhanced Asset Quality

Asset quality saw substantial improvement, with Gross NPA reducing by 50 basis points YoY to 2.41% and Net NPA declining by 27 basis points YoY to 0.36%. The Provision Coverage Ratio (PCR) stood strong at 97.32%, with a tangible PCR of 85.47%. Slippages for the quarter were ₹419 crore, primarily from the RAM segment, and management expressed confidence in regularizing SMA-2 accounts, which stood at ₹316 crore for corporates, with no expectation of them slipping into NPA.

Strong Capital Adequacy and Provisioning

UCO Bank maintains a healthy Capital Adequacy Ratio (CAR) of 17.43%, with Tier 1 capital at 15.41% and CET1 at 15.18%. Including the 9-month profit, the CAR further strengthens to 18.67%. The bank has already provisioned ₹1,252 crores towards Expected Credit Loss (ECL), approximately 50% of the estimated total of ₹2,500-₹3,000 crores, with plans to complete the provisioning by June 2027, building approximately ₹200 crore this quarter.

Digital Transformation & IT Initiatives

The bank's 'Project Parivartan' has made significant strides, with over 30 digital journeys live across retail, Agri, MSME, and liability segments, building a digital business book of ₹15,900 crore. More than 50% of FDs and loans against FDs are now processed digitally. The bank plans to invest ₹800-₹1,000 crore in IT for the next year, following a spend of ~₹700 crore out of a >₹1000 crore budget this year, focusing on omni-channel experience, supply chain finance, robotic process automation, and cybersecurity.

Strategic Expansion and CASA Strength

UCO Bank is strategically expanding its presence, focusing on western and southern regions with higher GDP contributions, while leveraging its strong base in East and Northeast India. The bank has successfully maintained its CASA ratio in the 37-38% range, improving by 44 bps to 38.41%, which is crucial for cost-effective funding. Initiatives like revamping saving/current account products and targeting central government salary accounts are expected to further strengthen the CASA franchise.

NBFC and Gold Loan Portfolio Management

The bank's total exposure to NBFCs stands at ₹27,000 crore, representing 12% of its total book, with no significant slippages reported except for MFI, where exposure has reduced from ~₹1,300 crore a year back to less than ₹500 crore and is under control. The gold loan portfolio is ~₹15,000 crore, split between retail (~₹4,000 crore) and agriculture (~₹10,500 crore), with conservative LTVs of 25-30% for retail and 15-20% for agriculture, ensuring asset quality.

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