UCO Bank to raise Rs 625 cr

UCO Bank is all set to raise Rs 625 crore through the perpetual non-cumulative preference shares (PNCPS) route in a bid to support its immediate asset expansion plans.

Of this, Rs 325 crore would be raised by March end to augment Tire I capital of the bank and the remaining Rs 300 crore would be raised later by way of alloting to the government.

“The decision with regard to converting Rs 300 crore equity into preferential shares is pending with the government,” said SK Goyal, chairman and managing director, UCO Bank. The Reserve Bank of India has already issued guidelines on raising capital through the PNCPS route and UCO Bank would be the first to avail this option.

Meanwhile, the bank is also considering a follow-on public offering (FPO) for raising its equity base. “We are ready for the FPO and as soon as the market stabilises we would opt for it,” Goyel added.

The bank has already worked out that around Rs 900 crore would come under the farm waiver scheme. “We have already submitted our figures to the government,” Goyel said.

The agricultural non-performing asset (NPA) of the bank is around Rs 308 crore and the bank had provisioned Rs 117 crore in this regard.

The Kolkata-based public sector bank is expecting to cross Rs 1,30,000 crore mark in business by the current financial year end and credit growth is likely to be around 17 per cent.

UCO net dips 33% on accounts restructuring

UCO Bank today reported a 32.67 per cent decline in its net profit at Rs 82.78 crore for the third quarter ending December 31, 2007 as against Rs 122.95 crore recorded during the corresponding quarter last year.

According to S K Goyel, chairman and managing director of the bank, this dip in the net profit is mainly due to restructuring of accounts, which accounted for Rs 22 crore, and Rs 34 crore provisioned for taxation.

Ironically, during the period under review, total business of the bank grew by 20.85 per cent to Rs 1,22,262 crore from Rs 1,01,167 crore reported a year ago.

This include 24.33 per cent rise in deposits to Rs 72,402 crore from Rs 58,232 crore and 16.13 per cent increase in advances to Rs 49,802 crore from Rs 42,877 crore reported a year ago.

Total income of the bank stood at Rs 1,824 crore for the quarter ended December 31, 2007, up 25.67 per cent from Rs 1,451.97crore registered in the corresponding quarter last year.

In the same period, the net NPA of the bank stood at Rs 2.37 per cent, a marginal decrease from 2.17 per cent reported in the corresponding period last year.

“This decline has been mainly due to some pockets where natural calamities hindered the recovery process. The government has approved Rs 50 crore as compensation on this count,” Goyel said.

UCO Bank eyes merger by Mar `08

In a bid to boost its business, Kolkata-based UCO Bank is looking at the merger route by the end of this financial year.

“We will not acquire any banks, but will merge with some other banks in three months. This move will help us cross the total business figures of Rs 2 trillion,” said SK Goyel, chairman and managing director.

Currently, the bank’s balance-sheet size was Rs 1.23 trillion. Regarding the size of the banks it plans to merge with, he said they might be smaller or equal in size, but not larger than UCO Bank.

The chairman declined to divulge any further details saying that they were in the process of negotiation.

On being asked whether United Bank of India (UBI) is a possible candidate along with a South-based bank for the merger, Goyel refused to comment.

PK Gupta, chairman, UBI, has dismissed any such proposals from any banks. “As of now we haven’t received any such proposals from any banks,” he said.

When inquired, A C Mahajan, chairman and managing director, Allahabad Bank, said, “We have been weighing the merger option for the last 2-3 years, but there are no takers right now. Nothing is available as of now in the market.”

Meanwhile, commenting on the recent downgradig by rating agency Crisil, Goyel said it was only for the Tier I perpetual bonds that the rating had declined, and not for the bank as a whole.

“It does not make any difference to the overall ratings of the bank, and for that matter, we received the best ratings of 9.35 for the Tier II Bonds,” he clarified.

Regarding net interest margin (NIM), the chairman sounded optimistic saying, “NIM will increase to 2.8 per cent by the end of the current financial year compared with 2.52 per cent during the first half of the financial year.”

Fitch revises UCO Bank`s outlook to negative

Fitch Ratings today revised the outlook on UCO Bank’s national ratings to “Negative” from “Stable” due to low tier-I capital level and deterioration in profitability.

While UCO has been improving its operational efficiencies and risk management systems, its capitalisation and profitability ratios have slipped below the system median for Indian banks, the rating company said.

The Kolkata-based bank’s tier-I capital ratio at 5.78 per cent and equity/assets ratio at 3.56 per cent (end-March 2007) were also lower than its peer group government banks. Therefore, UCO needed to infuse substantial equity and demonstrate a clear trend in improving its profitability, Fitch said.

The bank’s profitability weakened because of two reasons: one, the rapid loan growth in recent years was funded by an increasing proportion of higher cost wholesale deposits and, two, low yields on the corporate loan portfolio, it said.

The bank has put on board a capital restructuring plan to improve valuation. It has requested the government to convert a part of its equity into non-cumulative preference shares to be followed by a public issue of equity shares.

It needed to issue more equity than planned to maintain its tier 1 ratio well above the regulatory requirement of 6% (from 2010).

This is particularly significant since the government’s holding in the bank after equity expansion could dip to the statutory minimum of 51 per cent from the current 75 per cent. It will limit the bank’s flexibility to raise further capital.

UCO plans to increase the proportion of low-cost deposits (saving account plus current account - CASA) from 28 per cent of total deposits at end September 2007. The level of CASA deposits of the bank is lower than that of other large government banks.

Its ability to do so could be constrained due to delayed implementation of technology and increased competition among banks for low-cost deposits, Fitch added.

Source - Business Standard