UCO Bank (UCOBANK) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining UCO Bank Q2 FY '27 Earnings Conference Call. Today from the management side, we have with us Mr. Rajendra Kumar Saboo, MD and CEO, sir and Mr. Vijay N. Kamble, Executive Director. We will start with the Q&A session -- we will start with opening remarks by the MD sir post which we will have a Q&A session. With this, I hand over the call to the MD sir for his opening remarks. Thank you, and over to sir.

Thank you. Good afternoon to all. And welcome to all analysts and investors in this analyst meet con call for the financial results of UCO Bank for the quarter ended 30th September 2026. Already, the results have been published on the website of stick exchanges, press release has also been published, and presentation -- detailed presentation has also been placed on the website, on the website of BSE, NSE as well and our bank's website. I hope that you must have gone through that. Still, I will just give a brief about various highlights of our results for the quarter and half year ended 30th September 2026. The total business of the bank has reached to INR 6,37,280 crores registering a growth of 18.81% year-on-year. In this, the total gross advances -- global advances of the bank has grown by 24.70% year-on-year, reaching to INR 2,87,690 crores. And our total deposits have grown by 14.36%, reaching to INR 3,49,590 crores for the period. Out of this deposit, CASA growth has been 10.59% year-on-year basis, reaching to INR 1,22,259 crores in which savings deposit has grown to INR 1,03,736 crores, with a growth rate of 9.10%. And current deposit has grown to INR 18,523 crores with a growth rate of 19.70% year-on-year basis. Thereby, our CASA ratio has been maintained at 36.77%. This is slightly lower than the June quarter. Whereas the advances have grown by 24.70%, the growth has come from all the sectors like retail, agri, MSM and corporate. So the retail advances have grown by 29.59%, agriculture growth, sorry. Retail has grown by 30.23% and agriculture has grown by 29.59% and MSME has grown by 20.32%. And overall RAM sector growth has begun 26.92% and total RAM portfolio stands at INR 1,68,736 crore. With this growth in advances and deposits, our profitability has also improved. So our operating profit is INR 1,872 crores for the quarter, with a growth of 16.04%. Net profit has grown to INR 786 crores, growth of 26.77% year-on-year basis as against INR 620 crores in the last year, September 2025. The NIM has been maintained at 3% for the global, and domestic NIM has been maintained at 3.19% for the quarter. This profitability is also coupled with the asset quality improvement as well. So our gross NPA ratio has reduced year-on-year by 60 basis points to 1.96%. And net NPA ratio has improved by 25 basis points year-on-year and the net NPA ratio stands at 0.18% as on 30th September 2026. If you see this growth rate and profitability and the NPA position, our guidance in the beginning of the year, which we have given, the actual are exceeding the guidance except for the CASA ratio. So while we have given growth guidance in deposits of 10% to 12%, our growth has been 14% plus. We have given guidance in advances growth of 12% to 14%. The growth has been 24.7%. Our guidance on the GNPA was to make it less than 2% by 31st March 2027. We have already -- in half year, we have brought it down to below 2%, and our GNPA ratio is 1.96%. Same way, our guidance for the net NPA ratio was to bring it down below 0.25% over the year. But in the half year itself, we have brought it down to below 0.20%. That is 0.18%. Our EBITDA adequacy ratio stands at 18.85%, with Tier 1 ratio is 17.27%. Our CD ratio has improved to 82.29% as against 75.47% in the previous year. Our total provision coverage ratio, including PW has increased to 98.36%. Our net interest income, if we go deep in the profitability. Our net interest income has grown by 13.96% year-on-year to INR 2,886 crores. Our cost of funds has increased somewhat a little bit to 4.44%. Our yield on advances is 8.11% for the domestic and 7.79% for the global for the quarter. Our cost-to-income ratio is 50.39% for the quarter ended 30th September 2026. Return on assets is annualized to 0.80%, which was 0.71% last year. And out of the noninterest income, our fee-based income has grown 34.66% to INR 558 crores in the quarter. Our slippage ratio, also, we have given the guidance of slippage ratio to keep it below 1%. And for the quarter, it is 0.85%. So thereby, we have also maintained our slippage ratio below the given guidance. The productivity also has improved, like business per employee of the bank stands at INR 30 crores, which was INR 25 crores last year. Same way, business per branch has also improved to INR 185 crores as against INR 161 crores, which was in the last year. We have a branch network of 3,439 branches, and we have added 27 branches. We have 3 international branches like Hong Kong, Singapore, and we have opened our Gift City IBO also in this quarter only. So mainly, this is the highlight of the business and profitability and asset quality. I will just quickly present few initiatives we have taken during the last quarter, which has helped us in growing the business as well as improve the profitability and asset quality. Like we all know, the CBDC is also a very important development in the Indian economy. So our bank is also working to bring the CBDC offering for the customers. In the last quarter, we have launched 2 special features on CBDC. One is UCO Digital Rupee Marketplace, where the CBDC can be utilized through CBDC wallet, the marketplace has been connected and many types of payments like ticket booking, gift cards and all those things can be booked through CBDC as well. We have also launched our CBDC IVR services, whereby offline also customers can utilize the CBDC. We have started our robotic process automation process wherein 7 processes have been automated through RPA. We have implemented digital market solution. So as to do the digital marketing for our products is we know that the bank has undertaken Project Parivartan, wherein our digital business balance sheet has grown to INR 48,000-plus crores as on 30th September 2026 to increase the digital business balance sheet size further, we have onboarded digital marketing solution as well, which will help us in this. We all know that UPI is also a very, very important payment channel. And constantly, there are many improvement in the features of UPI. And recently in the Global Fintech Forum in Muro, many new features have been launched, and UCO Bank has also been participating in this, like we have launched on UPI tap and pay. We have launched UPI Help 2.0. And we have also launched a UPI automatic surveillance system, where in any VPA, any QR code, where the customer wants to make payment that can be checked for its authenticity or genuineness. Same way, we have also launched an online self-service module where the customer can book certain services from the website of the bank. We have also started a customer 360-degree portal in our branches, wherein the customer's entire 360-degree view is available to the branch. This will help branches to do the sell and better customer service. I already told that we have opened a GIFT City branch in the last quarter which has been doing good business as well. And we have launched many new products as well in agri, retail and MSME to take it ahead as well as we have also launched some products in deposit aspects. We have done a launch for EFDR under MCX. We are already live EFDR in BSE and NSE. Now we have added MCX also, multi-commodity exchange also, where brokers can make EFDR through our bank. We have done -- to strengthen our CASA position, we have done many MOUs with various government departments and large institutions like we have entered into an MOU with government of Bihar for their employee salary accounts. We have been empaneled by the state government of Rajasthan as well for the salary account package for their employees. Same way in HR also, we have been doing recruitment wherever needed, like in current financial year, we have recruited some specialist officers, which are data analysts, CAs and threat finance officer, et cetera. And for the next year also, we have started some recruitment process for our -- for probationary officers and other customer service associates. So I think these are the major developments in the last quarter, we have undertaken to improve our service offering to the customers. And now I open the floor for all the analysts and investors or their queries. We will try to reply those queries. Please.

[Operator Instructions] We will take the first question from the line of Ashok Ajmera.

And just congratulations to you for yet another good quarter of very good performance, especially but for that, I think, onetime one-off recovery in the last quarter, our operating profit, otherwise is better than the Q4 of '26, so which also only a few points are on the asset quality basically, overall, the gross profit, our gross NPA has also come from the net NPA...

Sir, we are not -- there is a voice break, sir, in between. please repeat. [Technical Difficulty]

We are losing your line in between, can you please come back in the good network area?

Can you hear me?

Yes. Now we can hear you. Can you please repeat your question? Hello?

Yes, can you hear me now?

Yes, yes, it is better.

Yes, it is better, please go ahead.

Okay, sir. So what I was, in fact, telling I think you must have heard me, the initial -- my message. Congratulations to you. My only -- a few pointers which are there is, number one, the recovery from the return of account of INR 301 crores in this quarter against the INR 1,018 crores. Is it a normalized rate of recovery or this quarter was a little less, as regards the recovery are concerned? And similarly, on the treasury also, everybody knows, I mean, there is a pressure on the treasury because of the yield hardening up. So going ahead, going forward, what do you see in the -- on the treasury front also? And connecting with this sir, the slippages have gone a little bit up in this quarter from INR 428 crores to INR 538 crores. And likewise, the SMA 1 number -- numbers have also gone up from INR 228 crores to INR 437 crores. So some color on that. And then I will ask my second question, sir.

Okay. Thank you, sir. So coming to the first question of TW recovery, I want to say that last quarter, June quarter, yes, there was a one-off TW recovery in 1 account, it was around INR 785 crores. if we remove that INR 785 crores from debt recovery, the net recovery in the last quarter was, I think, INR 233 crores. Against INR 233 crores of TW recovery in the last quarter, our normalized recovery is INR 301 crores in this quarter. So this is the normal recovery. In this quarter, we don't have any such big recovery account. That was one-off in the last quarter. So I think going forward, yes, as you know, that most of them means bigger accounts, recovery has already happened. So now the TW recovery will be normalizing. And this is the normalized recovery, only 300 around, we will be trying to keep it going forward also. Then second point of your question was about treasury yields. So we all know that the yields have been hardening not only in India, but across the world also, and that has impacted the treasury profitability. And I think going ahead, it will depend again on the yields as how the yields will be behaving. We all know that there has been a rate hike by RBI also 0.25% repo increase has been there. And we don't know we have to see how this pans out going ahead. How the inflation data, growth data comes and basis that what action is taken. But as of now, the yields are hardened. So in the hardening yield scenario, we all know that the treasury profitability is . But yes, on the other side, we see good interest income from the advances because as you know, that the repo rate hike has already been passed immediately, and we have around 66% of our advances portfolio linked with the repo rate, external benchmark lending rate. So we will see means improvement in the year as well as net interest income with this repo hike. So this will be compensating more or less to the treasury losses if you see any going ahead. So that is the situation there. But because we have a limited amount of book in under treasury also. So that is also very, very curtailed. Any treasury losses are not that much, which may be of concern -- so that is a normal thing. And we have a very, very controlled portfolio FVTPL and treasury. So that is not a concern. And then slippages, you have said it rightly, that yes, slippages have been higher on this September quarter. And we all know that in the September quarter, there is a classification exercise due for agriculture advances. Agriculture advances are home loan, particularly are classified only on a half yearly basis. So this quarter as well, September, this has become due and the highest slippages are only due to the agriculture marking. And if you see half year to half year, means March to -- last year September to this year September, then we can compare it very well. And we will see that the gross -- this NPS slippage has even come down from the previous year to this year's September quarter. So overall, the asset quality has been therefore, maintained. As you can see that the last September '25 overall slippage was INR 629 crores, which has now come to INR 549 crores. So this is the position in slippage. As far as SMA is concerned, so SMA, you have said that, yes, there has been a little high in SMA 1 and 2. But yes, it is under control because SMA, we all know that -- this depends on the rate, what is the position of demand and recovery. So a little bit means moves back and forth. But we are still maintaining SMA level of 0.42% only. That is up INR 1 crore and above. We always declare SMA of INR 1 crore and above. And that is 0.42%. If we compare it, again, year-on-year basis, there is an improvement, 0.77% to 0.42%. And maybe, yes, quarter-on-quarter, there is a little spike, but it is also manageable and normal. There's -- nothing is abnormal into this SMA position also. This is my position in this regard. I think I satisfied your queries.

Yes, sir, yes, sir, you very well satisfied, sir. Sir, this rate hike, which is there and now you said that 67% portfolio, the repo rate linked and the rates have immediately have been gone up there. So similarly, now what is our exercise going to be for the deposit rate hike. Is there any time lag which will give us the benefits in this quarter, like especially in the October, December quarter and maybe the lag effect of that might come in a little later. So can you just a little bit give some color on that, sir, that when are we going to do the exercise to increase the deposit and to what extent the deposit increase will take place. Deposit rate?

So yes -- so sir, you have rightly said that there is always a lag effect. Lag effect in the rate of interest on deposits to the rate of interest on advances. So immediately, because external benchmark lending rate, we immediately pass on. So advances rate linked to the repo rate are already increased. But deposits, you know that whenever the situation will arise that yes, we have to oblige the deposits, and we need to increase the rate of interest that we will increase. And then usually, whenever the renewal of the deposit will fall due that will be applied because the increased interest rate on deposits will apply only on the new deposits. So that is the case there. But as of now, we don't see that immediate need is there for increasing interest rate on deposits. As of now, we are maintaining whatever the rate of interest is already there on term deposits in our bank. So we are maintaining that. Maybe going forward, we will see the situation as to how the requirement of deposit is there and how the supply comes there and whether we need to increase. We will take an appropriate call in due course of time.

Sir, on the credit growth, our growth is good. But our major growth is still coming from the RAM sector, only retail agriculture, a little bit of MSME. On the corporate front, do we see some -- is there any change in our stance? Like are we now started looking at some good corporate accounts? Good credit. So from there also the credit growth may come and you might increase your target of the overall credit growth for the current year because you have been doing very well even in this quarter also, the -- I think the credit growth is 5.47% overall. So from the corporate book, where do we stand and what kind of sanctioned pipeline and the projects in pipeline do we have on that front?

So sir, as I told in my opening remarks also that our advances growth has come from all the sectors. Like our retail advances have grown 30%. The agriculture advances have grown around 30%, MSME 20% and even corporate advances, which you are talking about, have also grown 24% year-on-year basis. So it is not like that we are not looking at corporate advances. We are looking at corporate advances as well. That's why we have grown by 24.15% year-on-year in corporate advances as well. But yes, our guidance was that our RAM share will be 62% to 65%. So we have reached the 65%. We have already crossed 65% in this quarter in RAM share, so we will be maintaining around 65% only. And maybe the growth will be evenly spread, and we will be maintaining this ratio. So the corporate growth will also be there and RAM sector growth will also be there. As far as the sanction pipeline is concerned, we already have around INR 10,000 crores sanctioned pipeline in the corporate advances. And sometimes, you know that in the corporate advances, the disbursements are subject to the yield loan advances available, rate of interest available instead of interest, the corporates are yet to pay. So I also think that with the hike in the repo rate and the overall scenario in the market, corporates, whenever they mean need to avail the credit lines, if the rate of interest offered is in our means requirement, we will definitely go for that also in further enhancing our corporate advances portfolio.

Sir, just a last small question, sir. The other operating expenses in this quarter have gone up a little bit by INR 160 crores. So is it a normal or is there also -- there is some maybe INR 50 crores or INR 100 crores some one-off account? Or is it is it going to be there in the remaining quarters? So actually, if we see -- when the business is growing and when we are expanding our network also when we are expanding our IT solutions also, so the investments are happening in the IT solutions, in digital infra and other things also as well. So normally, the operating expenses will also grow. But I think that there has been a lead lag effect in operating expenses growth as well, so we have been maintaining this growth in a few quarters in the last year. But I think this quarter's operating expenses reflect the true picture of our growth as well as our expansion plans. So this is normal. Nothing is abnormal there also. Normal growth is there depending upon the number of transaction volumes we are undertaking. So that will be in the same range going forward.

We will take the next question from the line of Ashlesh.

Sir, just 2 quick questions. Firstly, on the ECL estimate, what is the estimate that you expect -- what is the estimate you expect on the onetime transition in April '27? And is there any change to that estimate because of the changes in bond yields? That is question one. And secondly, on the gold loan portfolio, I wanted to check if there has been any change in the yield on that portfolio over the last quarter?

Yes, to your first question, ECL. So -- we have done a rough estimate so far. And our ECL estimates from the first time means transition date, 1st April 2027. It is calculated around INR 2,500 crores requirement we will have, and you can see from our results also. And today, also in the quarterly results, we have provided for ECL provisioning beforehand. So we have over above whatever is the requirement -- actually, we have covered at least, I think 70% of our requirement of ECL transition provisioning basically. So I think we have already maintained over and above provision of INR 2,500 crores as against the requirement of ECL of around INR 3,200 crores plus. So we don't have much gap there. We will be providing maybe in the next few quarters also as and when the profitability permits us. So against the requirement, it is around INR 3,200 crores plus. We have already provision of INR 2,500 crore, out of which INR 530 crores is the provisioning cap for the COVID so that we are continuing that we can also use. And there are certain other provisions around INR 340 crores, which is on a extra provisioning we have done, that is also there. And then we have around INR 1,600 crore plus provision in the ECL for ECL as well specific. So total INR 2,500 crores provisions we have already made over and above the required one. So that is the situation there. Then the next point, gold loan you have asked, the gold loan yield, we have not seen any significant change in the gold loan yield. That is maintained as was in the last quarter also.

Understood. Sir, just a few clarifications there. This INR 3,200 crore number for ECL transition, this estimate -- was the estimate different when you did the calculation 3 months ago?

I think it is not materially different, maybe slightly changed because of our increased advances book and these small factors. There is a slight change, not much.

Understood. And sir, if you can just call out what is the gold loan yield as of now?

So gold loan yield, we have not separately calculated, but there is no change in the gold loan rate of interest in the last quarter. We have not made any changes. But yes, if there are any old loans which are linked to the then that is automatically with a rate of -- repo rate hike. The EBITDAR rate also will be increasing, so yield on gold loan portfolio, otherwise is around 9%, slightly less than 9%.

[Operator Instructions] We will take the next question from the line of Amit Mishra. Go ahead with your question. As there is no response, we will move to the next participants. We have a next question from the line of Sushil Choksey. Please go ahead with your question please. Meanwhile, we will take the next question from the line of Rusmik Ozha. We have a next question from the line of Amit Mishra. We have next question from the line of Sushil Choksey.

Congratulations on excellent performance in the current condition Sir, you answered quite a few questions to the previous question asked. Sir, what is based -- you are well capitalized, you have good deposit growth, the interest rate cycles are always favorable to banks on land. Would you like to accelerate your growth, be it in RAM or corporate? Or what is your outlook based -- you've said that corporate book is INR 10,000 crore book is sanctioned, how is the pipeline looking for Q3 and Q4 from both the sectors? RAM as well as? And if there is any slowdown which you are impacting led by agriculture or anything, whatever comment you have on that, sir?

So yes, as you know, sir, we have already given a guidance of advances growth. So we have given guidance of 12% to 14% growth in advances. But actually, we have grown by 24.7% in this quarter. So already, we have surpassed the guidance given. And we have seen this growth coming from all the sectors, as I have told from retail agri, MSME, corporate all. And depending upon the situation in the market, as you have rightly pointed out that the scenario is good, and credit growth is happening in the economy as well. So we will be keeping this pace maintained. Our target is to keep our growth more in the guidance we have given already. And we will continue to maintain that, and the growth will continue to come from all the sectors like retail, agri, MSME and corporate. And as I told, we have around INR 10,000 crores pipeline in the corporate rate, which is already sanctioned, but not yet disbursed loan, not yet availed. So it will depend on the market situation. And as I told that what the rate of interest in euro pans out and how the corporates go for availment. And also on the CapEx plan of the corporates, we will see -- and accordingly, we will respond. We are ready to take up the growth, whatever the credit growth we can take up in all the sectors. Also in the retail agri, we are growing in a good pace. In MSME, yes, there is a little more scope for growing. We will see onto that also. And we will maintain the growth as we have already guided. [Technical Difficulty]

So if your corporate book is showing INR 10,000 crore pipeline, RAM should be showing on a 2/3, 1/3 basis, a much higher number at INR 15,000, INR 17,000 crores. Are we working with that kind of a number? Or you may be conservative in your guidance at 12% to 14%, but actual number you may deliver at 50%, 70% higher, which means there is absolute reason that the bank should revise the guidance upwards.

Yes. So yes, you have rightly pointed out Chokseyji, but you know that the guidance approved by the Board in the beginning of the year, normally, we continue with their guidance only, and we don't change during the year. Normally, we don't change. But yes, last year also, the guidance was like that only but we grew more than that -- and this year also, we hope that, yes, guidance is 12% to 14%. That was given in the beginning of the year, keeping in at the time. But yes, as we move ahead in the year, we will see, and we will try to grow more than that, of course. And as you have seen the rate of growth in this quarter, 24.7%. So near -- it is nearly 25% growth. So it has come in handy in this quarter. So maybe not to that level, 25% is very high growth. But still, yes, we will be maintaining good growth and more than the guidance given. But I will not take any guess on the future growth rates as of now. But yes, we are in the trend of good growth.

Sir, I would ask a question on your specifically retail. We all know that housing market rates are higher in terms of percentage of ticket, cars are not being bought on a novel small but SUV and gold loan. So the average ticket per lending is going up by 30%, 50% or number of customers have you increased?