UCO BANK Share price

BRIEF HISTORY AND BACKGROUNDUCO Bank (formerly known as The United Commercial Bank Ltd) wasestablished in Kolkata (erstwhile Calcutta)"on January'6th 1943 byShri Ghanshyam Das Birla a noted industrialist of his time and someother eminent personalities of the country. Shri Biria was alsoappointed as the first Chairman of the Bank. The Bank started itsoperations at 4 Clive Ghat Street Kolkata with a subscribed capitalof Rs. 2 crore and a paid up capital of Rs 1 crore. It earned a profitof Rs. 5 lacs in its first year of operation. Due to increase in thevolume of business the Registered and Head Office of the Bank wasshifted to 2 Royal Exchange Place Kolkata. Again in the year 1964the Bank's Registered and Head Office was shifted to its presentpremises at 10 B.T.M. Sarani (Brabourne Road) Kolkata- 700 001. TheBank opened its first branch in the year 1943 and within a period ofone year opened 31 branches. By the year 1947 the Bank had a totalnetwork of 76 branches including its first overseas branch and a totalbusiness of Rs. 48.20 crore. In the year 1957 the Bank opened its100th branch and crossed the 200 mark by 1964.On July 19th 1969 The United Commercial Bank Ltd. was nationalisedand its name was changed to United Commercial Bank. At the time ofnationalisation the Bank had a network of 372 branches deposits ofRs. 257.53 crore and advances of Rs. 162.82 crore. Immediately afterthe nationalisation the Bank started expanding its branch operationsin the rural under banked and unbanked areas. By the end of 1979 thebranch network of the Bank increased to 1128. Deposits grewto Rs. 1493crore and advances rose to Rs. 917 crore. The Bank opened its 500thbranch in 1972 at Sonapur Assam and 1000th branch in 1977 at JatindraMohan Avenue Kolkata. On December 30th 1985 the name of the Bank waschanged to UCO Bank by an Act of Parliament.After nationalisation the focus of banking sector activity shiftedfrom class banking to mass banking. In order to improve and strengthenthe rural economy the Government of India introduced series of newschemes like Lead Bank Scheme (1969) Twenty Point Programme (1975)Integrated Rural Development Programme (1980) New 20-Point Programme(1981) and also established Regional Rural Banks as vehicles of creditdelivery to reach the remotest parts of the country. UCO Bank respondedto this national initiative with vigour and deployed substantial fundsunder schematic lending programmes. As on March 31st 2003 the Bank'spriority sector lending stood at Rs. 6332 crore out of which directagricultural credit was Rs. 2042 crore. This is 41.10% of net credit.One of the major challenges before the Bank was to neutralise theaccumulated losses incurred by it for consecutive years i.e. fromFY90 to FY99. To overcome this debilitating factor and to strengthenthe Bank's performance in various functional areas a major revampingexercise was initiated. In the year 1997 the Bank formulated a threeyear Strategic Revival Plan (SRP) (1997-2000). The plan focussed onaccelerated growth of deposits improvement in deposit mix creditdeployment improvement in portfolio quality control and supervisionof NPA accounts technology upgradation cost control improvement incustomer service and update balancing of books and other areas of housekeeping. The Bank successfully implemented SRP and achieved theobjective of turn around within a short period of three years. The Bankearned operating profit in the year 1998-99 and operating and netprofit in the year 1999-2000.The Bank implemented a three year Medium Term Restructuring Plan (MTRP)2000-2003 with a clear objective of becoming a Top class bank withprofessional ethos and also to earn substantial operating profit andnet profit year after year. This would also give the required financialstrength to the Bank to sustain growth and put the Bank in a strongfooting to meet emerging challenges. MTRP was implemented under theleadership of Shri V. R Shetty present Chairman & Managing Director ofthe Bank. During the currency of MTRP Bank took steps to restructureits organisational operational and financial activities. This waseffected through rationalisation of staff changes in administrativeset up and branch network business expansion and launching of newdeposit and advances products redefined approach to NPA managementtechnology upgradation manpower planning improvement in trainingsystem and capital restructuring of the Bank. The MTRP also took careto address in depth all the deficiencies pointed out in the VermaCommittee report (Working group on restructuring of weak public sectorbanks).The following table summarises the performance of the Bank before andduring the MTRP: (Rs. in crore)Year Total Total Total Operating Net Deposits Advances Business Profit Profit1999-2000 18360 8457 26817 133.81 15.59MTRP implementation period2000-2001 21536 10481 32017 206.46 114.772001-2002 26849 13009 39858 495.54 228.532002-2003 31343 16583 47926 660.15 243.60Note: Figures for operating profit and net profit are based on theauditors report given in Part II of the draft offer document. (Rs. in crore)Year ended No. of Branches Deposits AdvancesMarch 311944 31 12.77 3.55December 311954 107 40.42 24.64December 31.1964 202 133.90 93.44December 311974 739 542.07 370.55December 311984 1585 3055.96 1815.96March 311994 1796 9298.14 4577.58March 312003 1719 31343.39 16583.24PRESENT STATUSThe Bank as on March 31st 2003 has 1705 domestic branches (217metropolitan 337 urban 322 semi-urban and 829 rural) 4 overseasbranches and 10 service branches. This includes specialised branches -2 Industrial Finance branches 2 International Banking branches and 1Integrated Treasury branch. Bank has also 172 extension counters underits domestic operation. Bank has overseas presence also which arethrough its branches at Hongkong and Singapore totalling 4. Bank hassponsored 11 Regional Rural Banks spread over 5 States and has LeadBank responsibilities in 33 districts spread over 7 states. The Bank isalso Convenor for State Level Bankers' Committee in the States ofOrissa and Himachal Pradesh. Bank has been participating in varioussocial upliftmeot programme of the Government including its role underService Area Approach SACP and other rural/urban employment generationprogrammes.The Bank has the policy to improve its income and profit through growthin business. Its track record of business growth has been better thanindustry average as has been detailed elsewhere in the document. As onMarch 31st 2003 Bank's total business stood at Rs. 47926.63 crore.The Bank earned an operating profit and net profit during the year FY03of Rs. 660.15 crore and Rs. 243.60 crore respectively. Net NPA of theBank has on March 31st' 2003 stood at Rs. 697.14 crore which is equalto 4.36% of its net advances.The Bank's Capital Adequacy as on March 31st 2003 was 10.04%. Thecapital structure as on that date include Rs. 450.15 crore asSubordinated Bonds which it could raise successfully during FY01 FY02and FY03 respectively. Present capital of the Bank stands at Rs.599.36 crore after making an adjustment of accumulated losses to itscapital in terms of Ministry of Finance approval F. No/11/22/ 2001 -BOAdated September 6th 2002.The Bank has also reduced its expenses through restructuringorganisational set up and manpower by reducing number of Regionaloffices to the present level of 34 and by effecting special VoluntaryRetirement Scheme in FY01.Bank subscribes to the policy of transparency and makes disclosures asis required under the existing policy of regulatory Authority. It hasput in place Citizen Charter fair practice code and adheres to theprinciples of corporate governance.The formal banking system in India comprises the Reserve Bank of IndiaCommercial Banks Regional Rural Banks and the Co-operative Banks. Inthe recent past private non-banking finance companies also have beenactive in the financial system and are being regulated by the RBI.Scheduled Commercial Banks (SCBs)The scheduled commercial banks (SCBs) comprise of:Public Sector Banks (PSBs): The banking sector in India has beencharacterized by the predominance of PSBs. The PSBs had 46118 branches(SBI & Associates: 13434; Nationalised Banks: 32684) as on June 30th2002. The aggregate assets of all PSBs stood at Rs. 1155736.77crores at end FY02 accounting for 75.27% of assets of all SCBs inIndia. The PSBs' large network of branches enables them to fundthemselves out of low-cost deposits. PSBs account for 81 % of deposits74.43% of advances 77.63% of income of all scheduled commercial banksat end FY02 thus clearly demonstrating their dominance of the Indianbanking sector.Private Sector Banks: In July 1993 as part of the banking sectorreform process and as a measure to induce competition in the bankingsector the RBI permitted entry by the private sector into the bankingsystem. This resulted in the introduction of 9 private sector banks.These banks are collectively known as the 'new' private sector banksand operated through 803 branches at end FY01. With the merger of TimesBank Limited into HDFC Bank Limited in February 2000 there are onlyeight 'new' private sector banks at present. At end FY02 the totalassets of private sector banks aggregated Rs. 267679 crore andaccounted for 17.43% of the total assets of all SCBs. Although theshare of private sector banks in total assets has increased from 12.61% at end FY01 new private sector banks have accounted for most of thegain. The new private sector banks' share of assets of all privatesector banks increased from 27.5% at end-FY97 (2.4% of assets of SCBs)to 65.17% at end-FY02 (11.36% of assets of SCBs). The share of oldprivate sector banks (in total assets of SCBs) has decreased marginally(from 6.4% at end FY97 to 6.07% at end FY02) as well as their share intotal assets of private sector banks has declined from 72.5% at endFY97 to 34.82% at end FY02.Foreign Banks: Presently there are 40 foreign banks operating in Indiawith 203 branches. While 4 banks have 10 or more branches 18 bankswere operating with only one branch each. Some foreign banks have alsoset up representative offices in India. Thus as on June 30"' 200263banks had their presence in India including 23 banks from 12countries which have only their representative offices here.At end-FY02 the total assets of foreign banks aggregated Rs. 112096crore and accounted for 7.3% of the total assets .of all SCBs. Theprimary activity of most foreign banks in India has been in thecorporate segment. However in recent years some of the larger foreignbanks have started making consumer financing a larger part of theirportfolios based on the growth opportunities in this area in India.These banks also offer products such as automobile finance home loanscredit cards and household consumer finance. Deposits Advances 1999-00 2000-01 2001-02 1999-00 2000-01 2001-02Public Sector Banks 737281 859462 968749 354071 414989 480681Private Sector Banks 110039 136667 169440 54196 68058 116430Foreign Banks 49377 59190 64511 35858 42997 48632Regional Rural Banks 32161 38294 44539 12414 15050 17710UCO Bank 18360 21536 26849 7490 9865 12412 Total Income1999-00 2000-01 2001-02 90911 103499 117252 13690 16595 20817 10330 11984 12960 4142 4859 5561 2226 2572 3125Source: RBI Publications for Banking Sector Statistics UCO Bank figureas per Auditor's ReportThe salient features in the evolution of Indian banking are as follows:The number of banks (including regional rural banks (RRBs) hasincreased from 89 in 1969 to 293 in 2002. The population per branch hasdeclined significantly from 75000 in 1950 to 16000 in 2002. With thenationalization of banks in 1969 the number of bank branches(including Regional Rural Banks) increased from 8262 in 1969 to 66186in 2002. Most of the expansion has been in the rural and semi-urbanareas.Since 1950 the credit-deposit ratio of SCBs has declined to reach62.3% as on March 31st 2002 with a corresponding increase in theinvestment-deposit ratio. The change has been largely due to theGovernments regulations regarding the statutory liquidity ratio (SLR)and the preference for Government securities (as a result of theincrease in the Government borrowing programme and the low risk-highreturn nature of the instrument).Priority sector lending increased from Rs 14834 crore in 1984 toRs.210308 crore in 2002. (Credit to the agricultural sector andsmall- scale sector was one of the key objectives of thenationalization of banks.)Performance of Banking IndustryOn the funding side during 2002-03 (upto October 42002) aggregatedeposits recorded a growth of 12.6% (Rs. 138806 crore) as comparedwith 9.4% (Rs.90554 crore) in the corresponding period of the previousyear. During FY02 the aggregate deposits of SCBs increased by Rs.112340 crore as on March 292002 reflecting an increase of 13.60%(year on year) as compared with 16.20% during FY01. Depositmobilization was higher during FY01 because of Rs. 25700 crore raisedthrough India Millennium Deposits (IMD).On the assets side bank creditto the commercial sector increased at aslower rate than the growth in bank deposits. Bank credit increased toRs. 604500 crore as on March 29th 2002 reflecting an increase of14.20% (yoy) compared with 16.60% (yoy) during FY01. The slower growthin bank credit was primarily because of the industrial slowdown.Non-food credit increased to Rs. 489500 crore as on March 292002showing an increase of 12.40% (yoy). By contrast food credit of SCBsincreased 37.10% (yoy) to Rs. 54500 crore as on March 29th 2002 inresponse to the increase in the quantum as well as the price of foodgrains procured. The investments made by SCBs in government andapproved securities increased 19.50% (yoy) to Rs. 438900 crore as onMarch 29th 2002 compared with a growth-of 17.80% (yoy) on March 302001. As of end FY01 banks' holding or SLR securities amounted to Rs.106000 crore over and above the SLR requirement and was substantiallyhigher than the net annual borrowings of the Central Government.Following the announcement of policy measures during FY02 there hasbeen a decline in SCBs' lending and deposit rates. The PLRs of majorPSBs declined from 11 % to 13% p.a. at end FY01 to between 10% to 12%p.a. at end FY02. Some PSBs reduced their PLRs by 25 to 100 basispoints at the end of October 2002. The implicit yield on 91-day T-billsdeclined from 8.50% p.a. on March 23rd 2001 to 7.04% p.a. on July 4th2001 and 6.05% p.a. on March 20th 2002. Reflecting the comfortableliquidity condition deposit rates of PSBs which were ranging from4.00% to 10.50% in March 2001 softened to 4.25% to 8.25% by October2002 in all maturities except for a marginal increase of 25 basispoints at the short end of 15-day deposits. Long-term domestic depositrates of PSBs declined to 8.0% to 8.75% by March 2002 from 9.5% to10.50% in March 2001. During the current financial year (upto October2002) deposit rates of PSBs for maturity periods upto one year haveremained in the range of 4.25% to 6.75%. For longer maturities ascompared to March 2002 the rates for deposits of maturity over 1 yearto 3 years declined by 75 basis points while those for over 3 yearmaturity period declined by 50 to 100 basis points.Recent Trends in Banking IndustryIn recent years the banking industry has been undergoing rapidchanges reflecting number of underlying developments. The mostsignificant has been enactment of the NPA Act to tackle high incidenceon Non-Performing Assets. The Securitisatipn and Reconstruction ofFinancial Assets and Enforcement of Security Interest (Bill) 2002 waspassed by Lok Sabha in November 2002. It seeks to deal withSecuritisation of assets. Setting up of asset reconstruction company(ARCs) and enforcement of security interest. After the ordinance oh ?Securitisation Banks have been issuing notice to their defaulters forrecovering-money. Banks have issued more. than 1100 notices amountingto more than Rs. 10000 crores (around 9-10% of the estimated grossNPAs of the scheduled commercial- banks and developmental financialinstitutions).The first asset reconstruction company called Asset ReconstructionCompany of India Limited (ARCIL) has been incorporated and the majorshareholders are ICICf Bank Industrial Development Bank of IndiaState Bank of India each holding 24.5% in ARCIL. HDFC bank owns 10%and other remaining is held by IDBI Bank and UTI Bank. UCO Bank hasissued 1125 number of notices and amount involved is Rs. 86.24 croresfor recovering money till March 31st 2003 after the SecuritisationOrdinance/The Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act 2002 was passed.The retail loan market has grown at a CAGR of 34% over the last fouryears to reach about Rs. 45000 crores. Housing and Car Finance segmentaccount for nearly 80% of the retail finance segment.Absorption of technology and upgradation of technologicalinfrastructure which have accelerated and broadened dissemination offinancial information while lowering the costs of many financialactivities. This has also led to transparency in information to thepublic on deposits and advances and interest rate structures.The fiscal year 2002-03 for the Commercial Banks was by and largecharacterised by soft interest rates regime with flexible interest ratestructures. There has also been a good inflow of foreign exchange inthe country with taking the forex reserves of the country to all timehigh. There has been a comfortable resources growth with higher creditgrowth. Treasury operation of Banks has been offering handsomeopportunities of gains.The stance of the Monetary Policy in recent years has been to maintainadequate liquidity in the market with a preference for soft interestrates. With a view to having a vibrant and resilient competitivefinancial sector for sustenance of the reform process in the realsector of the economy the focus has been on the structural andregulatory measures to strengthen the financial system. These measureshave been guided by the objectives of increasing operational efficacyof the Monetary policy redefining the regulatory goal of Reserve Bankof India strengthening prudential norms.These developments have manifold consequences for the institutional andsystemic structure of the financial sector in general and banking inparticular. The business profile of financial institutions is alsoundergoing change. Mergers and takeovers of smaller institutions haveled to the emergence of transnational conglomerates offering servicesranging from traditional commercial banking to investment banking andinsurance.