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Explained: Why UCO Bank shares rose up to 16% today

Explained: Why UCO Bank shares rose up to 16% today

The stock opened 14 per cent higher at Rs 14.60 against the previous close of Rs 12.81 on BSE. With a market capitalisation of Rs 16,953.55 crore, the shares stand higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages

Explained: Why UCO Bank shares rose up to 16% today Explained: Why UCO Bank shares rose up to 16% today

Shares of UCO Bank rose 16 per cent to hit an intraday high of Rs 14.85 on BSE after the Reserve Bank removed UCO Bank from its Prompt Corrective Action Framework (PCAF) following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms. The bank was under PCA since May 2017.
 
The stock opened 14 per cent higher at Rs 14.60 against the previous close of Rs 12.81 on BSE. With a market capitalisation of Rs 16,953.55 crore, the shares stand higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. The mid-cap stock has risen 12 per cent since the beginning of this year and has delivered 11 per cent return in the last 12 months.
 
PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital and quantum of the non-performing asset.
 
The restrictions disable banks in several ways to lend freely and force them to operate under a restrictive environment that turns out to be a hurdle to growth.
 
The performance of the UCO Bank, currently under the Prompt Corrective Action Framework (PCAF) of RBI, was reviewed by the Board for Financial Supervision. It was noted that as per its published results for the year ended March 31, 2021, the bank is not in breach of the PCA parameters.
 
The bank has provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements that it has put in place which would help the bank in continuing to meet these commitments.
 
"Taking all the above into consideration, it has been decided that UCO Bank is taken out of the PCA restrictions subject to certain conditions and continuous monitoring," RBI added.
 
The bank posted over a four-fold jump in its net profit to Rs 101.81 crore for the first quarter ended June 30, as bad loans fell significantly. Profit in the year-ago period stood at Rs 21.46 crore. The total income during Q1 FY22 stood at Rs 4,539.08 crore compared to Rs 4,436.57 crore in Q1 FY21
 
The lender trimmed its gross non-performing assets (NPAs) significantly to 9.37 per cent of the gross advances as of June 30, 2021, as against 14.38 per cent at June-end 2020.
 
According to MarketsMojo, the bank has declared positive results for the last 6 consecutive quarters. The stock is technically in a Mildly Bullish range. With a ROA of 0.1, it has an Expensive valuation with a 0.8 Price to Book Value.
 

(With inputs from PTI)