UCO Bank - May 2025 Earnings Call Transcript Analysis

Earnings Call Transcript Analysis Report #

Financial Performance Analysis #

Key Financial Metrics & Comparisons #

• Overall Business Growth:
  • Reached ₹530,527 crore, a Y-o-Y growth of 14.12% for FY25.
• Deposits:
  • Grew by 11.56% Y-o-Y in FY25.
  • Savings deposits grew by 5.06%; Current deposits grew by 18.47% in FY25.
  • CASA ratio maintained at 37.99% (achieved target of 37.91% vs. guidance of 37-38%).
• Advances:
  • Grew by 17.72% Y-o-Y in FY25 (exceeding guidance of 12-14%).
  • Retail grew by 35%; Home loan by 18.13%; Vehicle loan by 58.99%; Agriculture by 20%; MSME by 18.55%.
• Asset Quality (Y-o-Y for FY25):
  • Gross NPA (GNPA): Reduced to 2.69% (reduction of 77 bps Y-o-Y).
  • Net NPA (NNPA): Reduced to 0.50% (reduction of 39 bps Y-o-Y).
  • Provision Coverage Ratio (PCR): Improved to 96.69% (up by 131 bps Y-o-Y). PCR excluding TWO improved to 81.95% (up by 704 bps Y-o-Y).
  • Slippage Ratio: Actual 0.92% vs. guidance of 1-1.25% for FY25.
• Profitability (Y-o-Y for FY25):
  • Net Interest Income (NII): Improved by 18.88%.
  • Non-Interest Income: Improved by 34.91%.
  • Operating Profit (FY25): ₹6037 crores (growth of 32% Y-o-Y).
    • Operating Profit (Q4 FY25): ₹1699 crores (growth of 33.48% Y-o-Y).
  • Net Profit (FY25): ₹2445 crores (growth of 47.80% Y-o-Y).
    • Net Profit (Q4 FY25): ₹653 crores (growth of 24% Y-o-Y).
• Margins (Y-o-Y for FY25):
  • Net Interest Margin (NIM) Domestic: Improved by 17 bps to 3.29%.
  • NIM Global: Improved by 16 bps to 3.08% (Actual 3.17% vs guidance 3.0-3.10% for FY25).
  • QoQ NIM (Global): Declined from 3.38% (Q3 FY25 implied) to 3.22% (Q4 FY25).
• Yields (Y-o-Y for FY25):
  • Yield on Advances (Domestic): Improved by 6 bps to 8.89%.
  • Yield on Advances (Global): Improved by 9 bps to 8.55%.
  • Yield on Funds: Improved by 36 bps from 7.89% (March 24) to 8.25% (March 25).
• Capital Adequacy (as of March 2025):
  • CRAR: Improved to 18.49% (from 16.25% last quarter).
  • CET1: Improved to 16.03%.
  • Tier 1: 16.37%.
• Other Ratios (FY25):
  • Cost of Deposit (FY25): Increased by 7 bps Y-o-Y. (Q4 FY25: 4.90% vs Q3 FY25: 4.87%).
  • Cost of Funds (FY25): Increased by 15 bps Y-o-Y.
  • Cost to Income Ratio (FY25): 56.99% (vs. 59.74% in FY24).
  • Earning Per Share (EPS): ₹2.04 for FY25.
  • Book Value: Improved to ₹17.53.
  • Business per employee: ₹24.35 crore (vs. ₹20.93 crore in FY24).
  • Business per branch: ₹155 crore (vs. ₹139 crore in FY24).
  • CD Ratio: 74.94% (within guidance of 74-75% for FY25).
  • Credit Cost: 0.87% (within guidance of <1% for FY25).
  • Total Recovery and Upgradation: ₹4,427 crore (exceeding guidance of ₹3,000 crore for FY25).

Revised Guidance or Forecasts (for FY26) #

• Deposit Growth: 10-12%
• CASA Growth: 8-10%
• Credit Growth: 12-14%
• CASA Ratio: Maintain 37-38%
• RAM %: 61-63%
• CD Ratio: Maintain around 77%
• Credit Cost: < 1%
• NIM Global: 3.00-3.10%
• GNPA: < 2.5%
• Net NPA: < 0.35%
• Slippage Ratio: 1-1.25%
• Total Recovery and Upgradation: ₹2,200 - ₹2,700 crore (lower due to early recovery in FY25).

Areas of Growth or Decline #

• Growth: Overall business, deposits, advances (especially retail, vehicle, agriculture, MSME), profitability (NII, Non-II, Operating & Net Profit), asset quality improvement, capital adequacy.
• Areas needing attention/Slight Declines: CASA growth was slightly below guidance (6.71% actual vs. 8-10% guidance for FY25), QoQ decline in NIM (explained by one-off income in Q3).

Strategic Initiatives & Business Updates #

Major Strategic Announcements #

• QIP Completion: Successfully completed QIP of ₹2,000 crore.
• Dividend: Board recommended a dividend of 3.90% (vs. 2.80% last year).
• Capital Raising Plan: Board recommended raising capital by issuing 270 crore shares of ₹10 each face value in FY26, potentially bringing government holding below 75%.

New Products, Services, or Markets Discussed #

• Digital Journeys (Project Parivartan):
  • Target: Digitize over 25 journeys in one year. Achieved 14 journeys in six months, exceeding ₹6,100 crore business via digital channels (target ₹6,000 crore).
  • Launched MSME digital journeys: GST Smart, MSME Smart (up to ₹25 lakh), Shishu, Mudra, Kishore, Tarun, digital renewal of CC accounts (up to ₹10 lakh). Clocked ₹200 crore business through these.
• WhatsApp Banking: Enhanced to 43 services (6 new services added in Q4 FY25).
• Mobile App: Revamped, rating improved to 4.8, “one of the best in the industry across public sector banks.”
• Chatbot (UDAY): Revamped with 16 account-related and 14 general services.
• Retail Product Revamp: Education loan, pension loan, vehicle loan, housing loan, gold loan products were revamped in FY25.
• MSME Schemes: 11 new MSME schemes launched in FY25. Cluster-based financing schemes planned for FY26.
• Female Customer Schemes: “Pink Basket” (specialized savings, current, Flexi RDA accounts, Aparajita debit card), UCO MSME Nari Samman, special discounts on study abroad, MSME, and home loans for women.
• Tab Banking: Introduced across all 3000+ branches. Enabled for savings and current accounts (proprietorship & individuals).
• EBG Facility & E-FDR: Implemented.

Significant Operational Changes #

• Project Parivartan: Creating a fully digital-first approach.
• Mule Account Monitoring: Launched “Pulse Alert Monitoring System,” integrated with I-4C, enhanced due diligence.
• HR Transformation (Project Samsiddhi): HRMS implemented, reward & recognition, learning & development programs completed.
• IT Infrastructure Upgrades (Completed in FY25):
  • Network Operations Center (NOC) implemented.
  • Network bandwidth upgraded (2 Mbps to 4 Mbps; Zendos 4 Mbps to 8 Mbps).
  • Digital balance certificate via mobile banking.
  • Application white-listing solution.
  • New virtual machine setup.
  • IT asset management solution.
  • Application performance management solution.
  • Resilience Operations Center (ROC).
  • API banking solution implemented.
  • Overseas Finacle migration/upgradation completed.
• IT Budget: ₹1000+ crore for FY26 (following ~₹642 crore spent in FY25 out of ₹1000 crore budget).

Ongoing or Completed Projects #

• Completed: As listed under IT Infrastructure Upgrades above.
• Ongoing/Pipeline for FY26: FXPC application, IDAM, data center consolidation, enterprise document management