UCOBANK Q1 FY27 earnings call.
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What the record says.
UCO Bank delivered a strong Q1 FY27 with total business reaching ₹6.05 lakh crore, growing 15.53% YoY driven by robust advances growth of 21.18% and deposit growth of 11.28%. Operating profit surged 79.8% to ₹2,810 crore supported by 16.85% growth in net interest income and 35% growth in fee income. However, net profit grew only 8% to ₹656 crore due to a one-time DTA remeasurement charge of ₹1,237 crore from tax regime transition. Without this charge, net profit would have been significantly higher. Asset quality improved substantially with GNPA at 2.08% (down 55 bps YoY) and NNPA at 0.25%, while provision coverage stands at 97.85%. The bank exceeded most annual guidance targets including credit growth and CASA ratios. RAM segments (retail, agriculture, MSME) drove advances growth with retail up 27.32%, agriculture up 30%, and MSME up 18.79%. Digital initiatives showed strong traction with digital balance sheet growing from ₹25,000 crore to ₹35,000 crore. Risk includes ECL implementation from April 2027 requiring buffer provisioning and moderate cost-to-income ratio of 37.49% likely to normalize closer to 50% going forward.
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Guidance to track
- Net Interest Margin guidance of 2.8-2.9% maintained for FY27; currently at 3.05% which management aims to sustain above guidance level.
- Annualized credit cost guidance of below 0.75% with Q1 FY27 actual at 0.39%; slippage ratio contained at 0.63% against 1% guidance.
- Cost-to-income ratio expected to be maintained below 50% for FY27; current 37.49% includes one-time TWW recovery of ₹800 crore not expected to repeat, so normalized ratio will be higher.
- Annual credit growth guidance retained at 12-14% though Q1 already shows 21% growth; management to review after Q2 results and may revise upward.
Risks flagged
- Ind AS 109 implementation from transition date April 1, 2027 requires building ECL provisions. Currently 60% of required buffer created; remaining 40% to be built over next 4-5 quarters, which may impact profitability.
- Processing fee from advances declined as bank shifted to actual charging basis from upfront annual renewal charges. Q1 sanctions and renewals typically lower, causing lower fee income which management expects to normalize.
- Annualized ROA at 0.68% is below optimal levels for PSU banks; one-time DTA charge of ₹1,237 crore and ECL provisioning requirements may continue to constrain ROA improvement despite strong operating growth.
- Cost of deposits slightly increased QoQ due to reclassification of deposits and borrowings between international and Indian books. While overall cost of funds declined to 4.36%, deposit repricing pressure may persist.
Key quotes
- Had it not been there [DTA charge of ₹1,237 crore], our net profit would have been more. So that is the reason why the net profit is at ₹656 crore.
- As a small bank we should grow more than the industry growth so that is our endeavor but we have kept the guidance as of now the same level we will review after the second quarter numbers whether we need to change the guidance.
- Going forward with this DTA thing 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 TWW our provision coverage ratio is 88%. So the NPA front we don't have to provide much. So our credit cost will remain controlled.
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