Portfolio

52-WEEK BLOCKBUSTER: UCO BANK

M.V.S. Santosh Kumar | Updated on March 19, 2011 Published on March 19, 2011

UCO Bank, one of the top performers in the banking sector, returned 75 per cent to its investors in the last one year. The gains by UCO Bank were partly due to the fact that the government has infused close to Rs 2,513 crore (this includes the Rs 940 crore expected to be infused this quarter) over the last two and half years into the bank. This has helped the bank to considerably improve its Tier-1 ratio from less than six per cent to over eight per cent. Even as the quantum of capital infusion was high, the equity dilution was limited given that Rs 1,573 crore of the total infusion came by the way of hybrid instruments (perpetual non-cumulative preference shares) whose cost of capital is lower than the cost of equity. The capital adequacy ratio improved from 11.45 per cent in December 2009 to 13 per cent in December 2010.

Additionally, the bank has also managed to improve its operational parameters over the one-year period ended December 2010, with net interest margin improving by 77 bps to 3.11 per cent, cost-income ratio falling by 6.3 percentage points to 40 per cent and credit-deposit ratio improving to 73.7 per cent from 71.4 per cent. However, higher provisioning and asset quality slippages continue to be a drag on the financials.

The price-to-book value of the bank improved to 1.5 times the December 2010 book value as compared to 1.1 times a year ago.



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