UCO Bank (UCOBANK) Earnings Call Transcript & Summary

Hello. Good afternoon, everyone, and welcome to the UCO Bank Q1 FY '27 Earnings Conference Call. Today, from the management side, we have with us Mr. Rajendra Kumar Saboo, MD and CEO; and Mr. Vijay N Kamble, Executive Director. With this, I hand over the call to MD sir for his opening remarks, post which we will have a Q&A session. Thank you, and over to you, sir.

Good afternoon, and thank you for attending this meeting -- our esteemed analysts and investors. Good afternoon to all of you. So you all noted, we have announced our quarterly financial results for the quarter ended 30th June 2026. We have already uploaded our presentation detailed results and with key highlights. I will just summarize the key performance highlights for the quarter for ready reference for all of you. So business growth of the bank has been very well and quite diversified also. So as you know that the total business of the bank has reached INR 6, 05,000 crore numbers on 30th June. This growth comes to 15.53% year-on-year growth in June supported by advances growth of 21.18% and deposit growth of 11.28%. So thereby our total advances -- global advances have reached to INR 2,72,768 crores and deposits have reached INR 3,32,315 crores. Deposit growth has been supported by CASA growth where our growth year-on-year has been 12.34%. Our total CASA stood at INR 1,16,136 crores. This is with the support of current deposit growth of 16.23% and savings deposit growth of 11.78%. Our CASA ratio at 30 June has been at 36.94%. Our advances growth has been contributed by all the sectors. In retail, we have grown by 25.27%. Overall, sorry, RAM growth and been 25.27%. And within the RAM, retail growth has been 27.32%. Our agriculture advances have grown by 30% and our MSME advances have grown by 18.79% year-on-year. So this is the growth in the business advances in deposit. With the support of this growth in business, our profitability has also improved. So our operating profit has grown by 79.8% to INR 2,810 crores in this quarter. This operating profit growth has been supported by core income growth, where our NII income has grown by 16.85%, then our previous income has also grown 35% and then there is a recovery from DW accounts that is about INR 1,018 crores. That has also supported us in our operating profit growth. While the operating profit growth has been good, our net profit growth has been 8% year-on-year to INR 656 crores. So there is an in-between provision. And our taxation provisions have increased. So we have provided for tax INR 1,919 crores. So that is the maximum in provision provided. Out of this INR 1,919 crores, there is a onetime DTA charge. So basically, earlier in the old tax regime, we were calculating [indiscernible] at the rate of around 35%. Now this financial year, we have moved to the new tax regime where the tax rate is at around 25%. So now with this change, the DTA has been recalculated, remeasured. And due to this remeasurement INR 1,237 crores one time DTA charge has been provided in the profit and loss account. So thereby our regular DTA mean regular case provision is around INR 625 crore or so and addition this INR 1,237 crores, total tax provision has been INR 1,990 crores. Had it not been there, our net profit would have been more. So that is the reason why the net profit is at INR 656 crores. Then with this profitability, our asset quality has also improved. So we have seen a reduction in gross NPA by 55 basis points year-on-year. So our GNPA as on date is 2.08%. Same way, our net NPA has also reduced by 20 bps year-on-year and our net NPA stood at 0.25%. And we have provision coverage ratio of 97.85%. If you go by the guidance given in the beginning of the current financial year, we have surpassed most of the guidance, like deposit growth, we were 11.28% against the guidance given 10% to 12%. Same when credit growth, our growth is 21% plus as against the guidance of 12% to 14%. We have maintained CASA ratio within the guidance just below 37%, ramp center advances constitute 64.5% as against our guidance of 62% to 65%. Our CD ratio stood at 82%. Credit cost has been controlled. We have given guidance to maintain the credit cost below 0.75%, against which in the first quarter, our annualized credit cost is 0.39%. Same way, our slippage ratio, we have given guidance of 1%, less than 1%, and our actual slippage ratio annualized for the quarter is 0.63%. So thereby, we have maintained it our GNPA, NNPA, NIM also, we have maintained as per the guidance given. So overall this financial performance has been encouraged. And other than the financial performance, if I talk about the various initiatives taken by the bank, so during this quarter also, we have taken many new steps, and we have launched many new products as we like in digital project Parivartan, we have started project Parivartan 2.0 where we are working to reiterate our call center as profit center. So many journeys we have been bringing on the call center also so thereby, in IVR, we have -- we are offering many more services to our customers and many new customers are connecting for their services through IVR and contact center, their fulfillment rate has also improved. We have launched STP home loan journey in the digital drive. We have also started our digital marketing solution wherein the marketing of various products is being done through the digital and we have integrated with the ULI of RBI that is Unified Lending Interface for STP home loan journey and STP Aashray loan journey. So they provide the vacant solution and vacant validation of various KYC and other things. Then we have also implemented our CBDC, and we have started our CASA base of where all the current account and saving accounts are being opened. We have implemented our DMS solution, digital documents management solution, which is helping us in working better in CASA focus as well as in our credit hubs like retail hub and gri and MSME hubs. We have launched many new products also like in for CASA and deposits we had launched UCO Rising Star for children. We have launched a UCO GIG scheme for gig workers in savings. Then we have started UCO business RM current account product, which is for the start-ups. And then we have recently launched 3-in-1 product for younger generation who have interest in investment for equity investment. So therein, we are proposing in providing our savings account and demat account with UCO Bank along with trading account -- stock trading account with collaboration with our channel partner, Aditya Birla Money. So these are regular initiatives. In IT front also, we have many initiatives like I told, we have upgraded our IVR, we have UDAY chatbot, which is based on the AI and then we have -- for a customer delight team, we have created to connect with the customers to understand their requirements and better our propositions for their fulfillment. Then many new projects also, we are having in pipeline like omnichannel is one project, which is going on. Very soon, we will be launching the omnichannel and the cash management service for our corporate customers that is also in pipeline that will come very soon then we are going to launch many new STP digital journey. Like for MSME, we have a GST smart product that is up to INR 25 lakhs, we are very soon going to launch for up to INR 1 crores that we are increasing, then prequalified personal loan journey digitally available. Now we are going to launch it to our contact center call center as well. This is also in pipeline. We are very soon going to open our GIFT City branch in the next month, we will be opening -- we have all approvals in place. Our IT implementation is in process, and we will be opening the branch very soon. And we will enhance our propositions and offerings on CBDC as well. So these are a few of the means important initiatives, which we have already planned and are in pipeline. So I think with this, I have provided the oversight about the results as well as the equity happening in the bank. Now I welcome any questions from the investors and analysts, we will reply those please.

[Operator Instructions] We will take the first question from the line of Sushil Choksey.

Congratulations to team UCO, Saboo and Mr. Kamble for excellent performance for the quarter. And I heard your television interview, I think it was a very stable guidance. Sir, my first question is, can you give me some guidance for the year in terms of cost of funds, cost of deposit, cost to income, which is dramatically improved year-on-year and quarter-on-quarter on RAM and corporate advances return on equity, return on asset, some kind of guidance on all these pictures.

Thank you, Sushil-ji. And yes, we have already given a few guidance in our presentation itself. Those are the guidance, which were given in the beginning of the year. We are continuing with those guidance, but it's still, as you have asked on many other profitability and efficiency parameters let me speak on that. So first of all, cost of funds and cost of deposits you have asked. So we have seen some moderation in our cost of funds. So our cost of funds has come down to 4.36%. So while -- in the last year's repo cut our deposits repricing has also completed. I think that was a lagging effect. But now I think most of the deposits have repriced to the latest new rates. So the deposits cost, I think, will be stable at this level going forward. And because of various channels, other channels other than the deposits like we are raising funds through borrowing through refinance, through other channels. So our cost of funds that has improved in the last quarter, I think that will also be remaining stable at that level only. So we expect that now we have reached the reprice of the deposits and with the support of all other products, we will maintain the cost of funds as well. And then NIM will automatically means we have not given any guidance. But yes, in NIM, we have given guidance of 2.8% to 2.90%. And we have reached to 3.05% with the support of lower cost of funds and our yield on advances have remained stable. So only 3 basis points, all is there in the yield-on advances. Maybe we will be keeping in the same range yield on advances going forward. So our NIM will be 2.8% to 2.90%. The guidance will be the same, but we will try to keep it above that only. So this is about the NIM and margin -- point you have asked about the cost-to-income ratio. So yes, cost-to-income ratio, we know that our bank our cost-income ratio was around 54%. Last year, it was 54.06%. In March also, it was 52.66%. This year, because of the high operating profit we have had, it has come down to 37.49% but because, as I told you, our operating profit consists of recovery from technical written-off account. So in INR 1,018 crore of technical written-off recovery, there is a major part, which is around INR 800 crores which is from few accounts, which we don't expect to repeat in the quarters going ahead. So the recovery of TW will be normalized. And in a normalized scenario, our cost-to-income ratio will not be at this level. It will further increase. But we expect that yes, with the improvement in the other financial parameters and profitability, -- for the year, '26, '27, we will be able to maintain our cost-to-income ratio below 50% or around 50% only, not above much above that. So that is our expectation from cost-to-income ratio. And I think credit growth already we have told that we have given guidance of 12% to 14%, and we have a good pipeline of credit sanctions that is around INR 15,000 crores pipeline we are still holding which may be disbursed in due course of time after the formalities are completed. And so the credit growth will be maintained, though we have the guidance of 12% to 14%. We will try to maintain it above that only. So this is our view on the base parameters.

Sir on advances, are we giving up IBPC and -- low yielding government advances towards other sectors like RAM or home loans or any other products? Or how is the rebalancing happening in the portfolio?

Yes. So as we have seen that our advances growth is coming majorly from the RAM sector growth. Our RAM sector growth is more than 25%. And within the RAM also, the growth is coming from all the sectors. Retail has grown 27.3%. Agri has grown 30% and MSME has grown 19%. So this growth is coming from these sectors, diversified sectors. So that will continue. And I think -- the corporate advances have also shown good growth, about 17%. But we are not in the IBPC. We don't have any IBPC exposure as of now. And we are trying to curtail any other low-yielding advances like maybe the PSUs or other government sector companies that is very, very limited, but still we are working as to how we can improve further our yield through various other sectors, exposure or maybe other corporates and group exposures so that we are working. But majorly, the growth is coming from RAM sector, where the yield is okay and can be maintained also.

Sir, my last question, post election in West Bengal, the investment climate is likely to improve and you are only surviving PSU bank in East as of today. What happens in the future, I don't want to speculate. But in that scenario, what kind of CapEx, what kind of meetings because I see that Chief Minister is driving a lot of growth and prospects, a lot of policies are being replicated. And a lot of minerals and many engineering companies are based in Calcutta, lot of Eastern belt is also doing well, led by a lot of agri-related whether it's bamboo tea and various other segments. If these sectors and state, both are reviving on a very high-growth path led by schemes. Are we getting any sense that UCO should benefit sitting in Calcutta?

Yes. So as you have rightly said, that UCO Bank is now the only bank having head office in Kolkata in public sector space. And we have -- our presence in West Bengal state very good presence. We have around 400 branches in the state and controlled by our 5 zonal offices. So we have a very good presence already in the state, and we are participating in the growth journey of the state. Maybe yes, with this change in the regime, we can expect many more means project development aspects coming for our financing, we see many opportunities in infrastructure as well as in industrial aspect. So many means we are trying to connect with various corporates in West Bengal and particularly in Kolkata, in various sectors like the steel sector and then maybe railway related sectors and then other infrastructure sector. So we see good opportunity going forward. in the state also, while we are open for opportunities everywhere in the country, as we have 3,421 pan India branch network but we are mindful of the situation in our small home state, and we are fully aware and fully prepared to take this opportunity and increase the growth in various business segments.

We will take the next question from the line of Nitin S.

My question is related with this change in the tax regime that we have gone in the new regime. So what would have been our ROA had we remained in the older regime? So can you please put that number. It was not there in the presentation. I think I missed that.

Okay. So actually, this is a statutory requirement.

Yes, I understand.

For financial year '26, '27, we have to shift to the new regime. So we don't have any option. But hypothetically, if we see the INR 1,237 crores is onetime charge. Had not been there, then it could have been added into the profit. So simply saying we could have more profits and then we can calculate the ROA, that could have been more than 1% also. That is our rough estimate, but we have not calculated by that way because ultimately, this is the situation, and this is the final number, which we have.

I understand, sir. Because from the comparison perspective, I wanted to understand that had we not moved what would have been ROA because that would have given a better picture to us from a comparison perspective. So what would be our guidance for NIM, ROA, EBITDA growth for the current quarter and the financial year?

So in the financial year, we have already given NIM guidance, that is 2.8% to 2.9%. We will be trying to keep the NIM around that level, maybe more than 2.9% slightly. And that will help us in improving our profitability. And ROA, we have not given any guidance as of now, but we have seen our ROA at 0.68% annualized with this profitability, which we have declared. But I think going forward, with this depleting going behind us and already we have sufficient provisions in NPA, as you can see that our net NPA is 0.25% only. And even we exclude the TW, our provision coverage ratio is 88%. So the NPA front, we don't have to provide much. So our credit cost will remain controlled, like we have given the credit cost guidance that is 0.75% below than that. And our actual credit cost is 0.39% -- so our credit cost will remain within that range of the guidance, then we will have better profitability in the net profit level also. That will help us to improve our ROA. ROA maybe at 0.68% today, we see at the year-end, maybe slightly near to 1%.

I understand, sir. My next question is, where are we getting the competition from, from the public sector bank only or from the private sector or NBFCs? Where is the competition coming from considering the sectors that we are involved with?

So in the banking space, we know that competition for competition, there are many players in the financial markets. So public sector banks are there, private sector banks are there. Then somewhere means in some pockets like rural and other pockets, RBs are also there. Then NBFCs are also nowadays providing credit support to people. So it means financial market is full of all these various types of players. So we don't see this as this is a competition only. We see this as an opportunity also because as the financial market also expands with more and more players coming into the picture, so people are migrating, they are graduating, maybe starting -- people start with the financial inclusion system, they open a bank account and then they take the insurance products, means social security and then they take some small loans like in various government schemes and then they expand and they move ahead and up the ladder of the wealth creation also. So being means many players in the system, this expands the market. This brings more and more new customers into the system and then customer graduates from NBFCs, MFI to NBFC, NBFC to bank, like that it happens. So whatever the competition is there, we are focusing on our own business strategy. And as a business strategy, we have means all the products in place, which caters to most of our customers' variety. So for retail, for agriculture, for MSME, for youth, for womanpower, for corporates. So we have all variety of products on liability side, deposit side as well as on the asset side. And we are running the project Parivartan for digital transformation of the bank. And we are providing as of now 31 SPP journey on digital platform. So our digital platform has taken up very well, and we are onboarding the customers through digital journey. I can share that we have around INR 35,000 crores digital business balance sheet as on 30th June. It was INR 25,000 crores in 31st March 2026. So we are growing our digital balance sheet through the digital products. As of now, I can share that fixed deposit making. Earlier, this was happening in the branches only physically. But now our customers, say 70% of fixed deposits are being made through digital channel only. So that is the shift from manual working to the digital working. And with this digital offering, we are providing hassle-free seamless services to our customers. And with good customer service and bundled products offering and digital system, I think we can acquire more and more customers. And then also we can service customers with many other products also. So more products per customer also we are working on. So this is our strategy to grow in all the business parameters.

Thank for this elaborate answer but you had duck my question because I was looking specifically where the competition is coming from, if any, private sector, specifically, say, for example, because private sector is saying that they have a severe competition coming in from public sector banks. So just from that side.

See, all these are competitors in the market. So everybody is facing competition from each other. So we can't quantify as to how much competition are you getting from private or from public sector. So we are getting good growth. You can see the numbers. So even though the competition is there, we are growing.

My final question is about which are the areas you talked about some areas in the previous question, where we are getting the maximum growth from? And where do we see risk in which customer segment we see the risk coming from?

So growth area, as I told you that we continue to grow in deposit side also. Now as we have this 82% of CD ratio, we will increase our deposit growth rates, particularly CASA. So we have offered many new products, and we are working on bundled products, digital offering so that we will be increasing CASA. Then in credit side, our focus will continue to be on RAM sector, retail, agri and MSME. Our share of RAM is 64.52%. We will continue to maintain that 65% around share of RAM in our total advances book. In retail segment, we have majorly 2 products, basically, one is home loan and other is vehicle loan. So our home loan growth is also around 20% year-on-year. And then our vehicle loan growth is 65% year-on-year. Maybe the 65% is on a higher side due to the lower base, even though we take the base to higher level going forward, I expect that around 30% growth in vehicle loan can be maintained even with a higher base and 20% to 25% growth can be maintained in home loans because the demand is there, and we can continue that. And then MSME, of course, is a new sector where we see good growth. So we have grown 19%, 20% in the past few quarters, and we will continue to grow in that range only in MSME sector as well. So these are the sectors where we have focused in agriculture also, particularly in gold loan also, we are seeing good growth, and that will also continue in gold loan. And I think majorly, these are the sectors -- if you talk about corporate sector, then yes, there are certain sectors where we see good traction like infrastructure HAM projects, still we are getting good number of projects. Then there is renewable energy sector where we get good projects, good proposals. And then transmission lines, infrastructure that is also a good sector coming up. And maybe the traditional sector also like steel and cement and port and other things. So we are open to these all sectors to finance and find any opportunities there.

And any areas where do you see the risk coming from? Any stress you see in any areas along?