UCO BANK on VENTILATOR(Must read till End)

Best SELL: TP 24MarchExp, 18 MayExp,

Downgrading to negative of UCO Bank by rating agencies is not a surprise if one looks at operational rot which is turning UCO Bank into Bad Bank.

As per Motilal Oswal Securities " Most PSBs are still trading at expensive valuations"

Our take: Even at Cmp, UCO Bank is the MOST EXPENSIVE PSB stock as its share price can fall another 50% upto Q4 results.

Investors have forgotten that it was CMD of UCO Bank who was prosecuted for various irregularities during Harshad Mehta scam/time Govt at that point of time was likely to write off UCO Bank (and

merge) but due to intervention of the then FM and assurances given by Union/Staff, Govt gave fresh lifeline and an opportunity to UCO Bank for revival but since then, condition of bank has grown from bad to worse RBI had earlier in 2008 put UCO Bank on MONTHLY MONITORING SYSTEM. It may happen again in 2016 as situation is alarming and UCO has CROSSED ALL PARAMETERS which qualify for Prompt Corrective Action by regulator RBI.

Name of Top 50 NPAs/defaulters in Banking Sector have appeared. Large no of these names are in portfolio of UCO Bank. This is the MAIN CONCERN

1) Q3 Loss at 1498Cr

2) NPA 14931Cr 10.98% (amongst highest in PSB). However, it may be noted that NPAs in overseas branches is lower. Otherwise, on standalone basis, DOMESTIC NPA 12.01% 

3)Return on Asset is (-) 2.56%: WORST in banking industry

4) Yield on Advances is 9.48% which is BELOW BASE RATE

5) Staff Cost up by 18.53%

6) Operating Profit nosedives by 48%

7) Interest income falls by 14.28%

8) Profit from Investments crumbles by 62.61%

9) Advances fall by 7.21%

10) Fresh Slippage at 7148 crores  is 5.5% of Advances although industry norm is 1%

11) Recovery of NPA in 9 months is mere 721crores (less than 5% NPA).With such slow recovery, NPAs are bound to shoot up further in coming quarters

12) NIM  only 1.93%

13) Cost to Income ratio 49.82% (almost twice of Private sector banks)

14) Net profit per employee is NEGATIVE

15) Foreign branches are incurring losses. Singapore branche has

incurred Loss of 38.70 crores

16) SECURITY COVERAGE IN MAJORITY OF LARGE NPAs VERY VERY WEAK/LOW and

Chances of Recovery are REMOTE

17) As per information, in many NPAs, value of securities like stocks, book debts have been OVERSTATED which have gone unnoticed by auditors. It will increase provisioning in future

18) UCO Bank is also allegedly involved in Export scam of Money laundering 

19) Some frauds in fixed deposits/advances have come on surface which are under investigation by CBI. It is bound to lead to further liabilities on UCO Bank.

20) CASA will fall substantially as current a/c deposit of over 20,000 crores at zero cost in respect of Iran will move out. Outgo of zero cost deposit will lead to higher losses. Bank may have to even provide for forex loss due to weak rupee.

We feel that NPA of UCO in Q4 may shoot as high as 14% which should be record in banking industry and Losses for FY17 may go up further.

UCO Bank in fact is turning out to be Bad Bank of banking industry and is tilting towards collapse

UCO Bank is a Class Room example of what can go wrong with a bank

SELL  SELL SELL

List of large defaulters of UCO being sent separately