SOME DAMAGING INFO ON UCO BANK
In Jan/Feb 2016, ALL our SHORT calls gave fabulous return to investing community, except UCO Bank which in fact has given losses to investors. Several investors have perhaps not yet squared off their SHORT positions and sending us messages to seek our latest position/advice on UCO.
Entire banking space has been marked by sharp recovery post budget due to various factors like Sharp run up in Nifty/Bank Nifty, short covering, bottom fishing, some brokerage houses becoming very bullish on PSBs and finally, flood of rumours that PSBs ke acche din aa gaye hain.
We feel that sharp run up in share prices of PSBs may provide God-send opportunity once again (when Q4 results are due) to SHORT heavily for very big returns in short period. Reason is that Q3 for PSBs was tip of iceberg and results of Q4 should be far worse and this pain can be prolong throughout FY17. Statements of PM and FM are not going to help improve Balance Sheets of PSBs. NPA recovery is possible only if such a/cs are backed by adequate securities (which in reality is not the case). Easier to make statement than done. CMD of IDBI Bank makes outrageous statement that IDBI Bank will have zero NPAs in 3 years. He should be reminded that SASF was created specifically to transfer entire 9000 cr worth NPAs to SASF which made IDBI Bank's NPAs zero.
But after that, NPAs of IDBI Bank are much bigger. CMD knows that he will retire before expiry of 3 year period, so there is no harm in making utopian statements. Similarly, merger of PSBs in 6 banks became viral. This writer/investor has not come across any official communique from FM that he has proposed merger of PSBs in 6 entities and hence, such tweets appear to be stories written by Kader Khan (of Bollywood fame). Investors have perhaps forgotten that how Essar promoters have indulged in brazen loot of bank money in 2003 or so when OTS was done for E Steel. But again, banks have proferred bounty of 40,000 crores to E Steel. Is it not corruption on part of bankers?
Opened vaults to known thieves once again. Everyone knows how CMD of a PSB was always called a doormat of Essar promoters as this bank had huge exposure of its loan book only to Essar group. Promoters have built PERSONAL empire of several billion dollars at expense of bank money and minority shareholders. If any political party/ruling party does thorough and honest forensic audit type investigation in ALL listed and non-listed entities of Essar group, such revelations will come that scale of loot of Vijay M will pale into insignificance. Now, sitting over 40,000 crores of bank money, how shamelessly co is once again demanding big concessions from bankers.
Anyway coming to UCO Bank specifically:
We estimate that UCO Bank Q4 results will be DISASTROUS in REAL SENSE, without exaggeration. We will not be surprised if post Q4 results, UCO Bank comes under direct monthly monitoring of RBI. Reasons are:
1. A fact known only to very few: Several large NPAs have been resorted to EVERGREEING by sanctioning interchangeability of Fund Based Limits to Non Fund Based Limits, say from Corporate Loan to FLC(foreign LC)/Standby LC. Such FLC/Standby LCs are for tenor of 2-3 years for discounting OVERSEAS. Proceeds of such LC/FLC are used for liquidating overdue accounts. Non Fund based Limits are not required to be classified as NPA for full tenor of LC/FLC. However, when tenor such LCs after 2-3 years is over, Non Fund Based Limits are bound to devovle and wreck Balance Sheet of UCO Bank. As per our info, such modus operandi runs into few thousand crores.,
2. As per info, several FDs have been encashed by fraudsters and UCO Bank is yet to indemnify genuine FD Holders.
3. Similarly, as per our info, there are several fake LCs which are being disputed by UCO Bank.
4. UCO Bank has disbursed LARGE sums to several companies which had done bogus accounting to get loans and such companies are closed for all practical purposes and UCO Bank may not be able to recover even 5% of such exposures.
We feel that year end Audit by bank's auditors as well as by RBI will be very stringent (which normally is case for all banks). At that time, various chinks of UCO's armour will be exposed and bank may have to make HUGE HUGE provisioning. We will not be surprised if UCO Bank reports loss of 2500-3500 Crores ONLY for Q4 Hence, we advise investors to hold on to their SHORT Positions until Q4 results are announced.
We also advise investors not to buy at present PSBs for INVESTMENT. Depending on technicals, broader markets rising and trading calls, investors may take risk of trading as PSBs may be available at much lower prices after 2-6 months
Q4 results are announced. In fact, investors with strong heart and patience can SHORT at current levels more quantity of UCO Bank April/May series
