💰 Financial Performance

Revenue Growth by Segment

Total income reached INR 29,474 Cr in FY25. In Q2 FY26, Net Interest Income (NII) grew by 10.08% YoY, while fee-based income grew by over 10% QoQ. Credit growth was led by the RAM (Retail, Agri, MSME) segment which grew 22.87% YoY, specifically driven by a 72.87% surge in vehicle loans and 18.94% in housing loans. MSME and Agriculture segments grew by 23.8% and 17.28% respectively.

Geographic Revenue Split

Operations are highly concentrated in the Eastern and Northern parts of India, which account for approximately 56% of the total 3,305 branches. Additionally, 61% of branches are located in rural and semi-urban areas. The bank also maintains an international presence with 2 branches in Hong Kong and Singapore and 1 representative office in Iran.

Profitability Margins

Global Net Interest Margin (NIM) stood at 2.90% and Domestic NIM at 3.08% for Q2 FY26. Net Profit for Q2 FY26 was INR 620 Cr, representing a 3% YoY growth. Return on Average Assets (RoA) was 0.71% for FY25 and 0.67% (annualized) for Q1 FY26. Operating Profit for Q2 FY26 grew 12.64% YoY to INR 1,613 Cr.

EBITDA Margin

Not applicable for banking; however, Operating Profit grew 12.64% YoY to INR 1,613 Cr in Q2 FY26. This growth was achieved despite a reduction in treasury and non-interest income, indicating stronger core performance from NII and fee-based streams.

Capital Expenditure

UCO Bank raised equity capital of INR 2,000 Cr through a QIP in March 2025. The board and shareholders have approved further equity capital raising of up to INR 2,700 Cr (face value) for FY26 to support credit growth and maintain capital buffers.

Credit Rating & Borrowing

The bank maintains a 'Strong' liquidity profile with a Liquidity Coverage Ratio (LCR) of 126% as of June 30, 2025. Capital Adequacy Ratio (CRAR) was 18.39% as of June 30, 2025, with a Tier-1 ratio of 16.36%. Cost of deposits stood at 4.84% and cost of funds at 4.73% as of June 30, 2025.

⚙️ Operational Drivers

Raw Materials

Not applicable for banking; the primary 'raw material' is the cost of deposits, which stood at 4.84% as of June 30, 2025. Low-cost CASA deposits represent 38.11% of total deposits.

Import Sources

Not applicable for banking operations.

Key Suppliers

Not applicable for banking operations.

Capacity Expansion

Current network includes 3,305 domestic branches, 2,575 ATMs, and 10,920 Business Correspondents (BCs). The bank is focusing on digital expansion, with digital business exceeding INR 10,500 Cr and digital account openings growing 236% YoY.

Raw Material Costs

Cost of funds was 4.73% as of June 30, 2025, compared to 4.78% in FY25. The bank expects profitability to improve as the cost of funds declines following anticipated rate cuts and phased deposit repricing.

Manufacturing Efficiency

Digital adoption is a key efficiency driver: digital advances grew 6x YoY, and digital renewals grew 48x YoY. The Credit-to-Deposit (CD) ratio improved to 75.47% from 71.77% YoY.

Logistics & Distribution

Distribution is managed through 3,305 branches and 10,920 BCs. Operating expenses are being rationalized to improve the cost-to-income profile.

📈 Strategic Growth

Expected Growth Rate

12-14%

Growth Strategy

The bank targets a 12-14% credit growth by focusing on the RAM segment (Retail, Agri, MSME), which now constitutes 65.23% of total advances. Strategy includes co-lending with NBFCs (pool exposure of INR 10,700 Cr), expanding digital business (currently INR 10,500 Cr+), and leveraging international presence in Singapore/Hong Kong for M&A financing opportunities.

Products & Services

Housing loans, vehicle loans, MSME loans, agriculture infrastructure loans, savings accounts, current accounts, and digital banking services via the 'Parivartan' journey.

Brand Portfolio

UCO Bank, UCO Anugoonj (Hindi magazine).

New Products/Services

Introduction of offline CBDC (Central Bank Digital Currency) facility and enhanced co-lending models with NBFCs to gain better visibility on customer onboarding.

Market Expansion

Expansion beyond the Eastern and Northern regions is planned to reduce geographic concentration risk, alongside a focus on M&A financing through international branches.

Market Share & Ranking

UCO is classified as a moderately sized Public Sector Bank (PSB) with a total business of INR 5.24 lakh Cr as of June 30, 2025.

Strategic Alliances

Strategic focus on co-lending relationships with multiple NBFCs to expand the loan book with controlled risk.

🌍 External Factors

Industry Trends

The banking industry is seeing a shift toward digital adoption and granular RAM lending. UCO is positioning itself with 236% YoY growth in digital account openings and a 65.23% RAM portfolio share to align with these trends.

Competitive Landscape

Competes with larger PSBs and private banks; currently focused on reaching scale to become more competitive outside its core Eastern/Northern strongholds.

Competitive Moat

The bank's moat is derived from sovereign ownership (Government of India support) and a strong retail deposit base. This provides a stable, low-cost funding source and high systemic importance, which is sustainable given the bank's nationalized status.

Macro Economic Sensitivity

Highly sensitive to RBI interest rate cycles; rate cuts led to a decline in global NIM from 2.99% in March 2025 to 2.96% in June 2025 due to immediate lending rate adjustments.

Consumer Behavior

Increasing preference for digital banking; UCO responded with a 6x growth in digital advances and 48x growth in digital renewals.

Geopolitical Risks

Presence in Iran through a representative office and branches in Hong Kong/Singapore exposes the bank to international regulatory and geopolitical shifts.

⚖️ Regulatory & Governance

Industry Regulations

Complies with RBI guidelines on capital adequacy (maintaining 18.39% CRAR vs regulatory minimum) and LCR (126% vs 100% minimum). Adheres to RBI guidelines for Security Receipts (SRs), deducting INR 275 Cr from capital as per norms.

Environmental Compliance

The bank has an ESG profile supported by board-level committees and initiatives for community development. Specific ESG compliance costs in INR were not disclosed.

Taxation Policy Impact

The bank has a Deferred Tax Asset (DTA) of INR 5,258 Cr. It expects to transition to the new tax regime in approximately two years (FY27-FY28) as provisioning requirements decrease and profits rise.

Legal Contingencies

The bank reported an NCLT recovery of INR 104 Cr in the recent quarter. Total Provision Coverage Ratio (PCR) remains high at 96.88% to cover potential legal and credit defaults.

⚠️ Risk Analysis

Key Uncertainties

Asset quality in the agriculture segment remains a concern with a GNPA of 10.81%. The impact of further rate cuts on NIM sustainability is a key uncertainty.

Geographic Concentration Risk

56% of branches are concentrated in Eastern and Northern India, creating vulnerability to regional economic downturns.

Third Party Dependencies

Increasing reliance on NBFCs for co-lending growth (pool exposure of INR 10,700 Cr).

Technology Obsolescence Risk

The bank is mitigating this through its 'Parivartan' digital journey, achieving 6x growth in digital advances to stay relevant against fintech and private competitors.

Credit & Counterparty Risk

Gross NPA is 2.63% and Net NPA is 0.45% as of June 30, 2025. The slippage ratio is 1.18% (annualized). 83% of the portfolio is already provided for in terms of tangible PCR.