BWI: Brickwork Ratings Assigns “BWR AA” for UCO Bank’s Upper Tier II Bonds Issue of INR 1.75 billion

Press release from Business Wire India
Source: Brickwork Ratings
Wednesday, June 24, 2009 04:48 PM IST (11:18 AM GMT)
Editors: General: Consumer interest, Economy; Business: Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst, Stock exchanges
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Brickwork Ratings Assigns "BWR AA" for UCO Bank's Upper Tier II Bonds Issue of INR 1.75 billion
Issue Rating: BWR AA; Outlook: Positive

Bangalore, Karnataka, India, Wednesday, June 24, 2009 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AA (Pronounced BWR double A) for UCO Bank's proposed Upper Tier II Capital Bonds Issue of INR 175 crore or INR 1.75 billion. The rating factored improving operating profits, asset quality and returns, diversified credit deployment, and the Government of India's equity stake.

In spite of the economic slowdown in the international markets and the consequent ripples in the domestic market, UCO Bank has posted improved operating performance during FY 09 compared to the previous year. The Bank showed a total business (INR 1698.90 billion) growth of 25.34% in FY 09 with the total advances (INR 696.69 billion) and deposits (INR 1002.21 billion) growing by 25.24% and 25.42% respectively.

The Bank's total deposits stood at INR 1002.21 billion, as compared to INR 799.09 billion a year ago. In line with mid-sized public sector banks in India, the Bank is also mostly funded through term deposits. The term deposits of UCO Bank account for 75.88% of total deposits. Further, the Bank's global advances grew by 25.24% to reach INR 696.69 billion during FY09 as against INR 556.26 billion during FY08. The Bank's credit to deposit ratio has marginally decreased to 69.51% in FY09 as compared to 69.61% in FY 08.

The Bank's asset quality has been gradually improving with better enforcement of credit culture and monitoring. As a result, the Bank's gross NPAs had come down to 2.21% as on 31st March 2009 from 2.97% for the same period a year ago. The Bank's net NPAs have shown a similar trend, which has declined to 1.18% in FY09 from 1.98% in FY08. The sustained improvement in the Bank's asset quality is significant keeping in view the strong loan growth witnessed during the year.

The Bank has been consistently generating profit over the years. The Bank has posted growth in revenues and profits, with total income of INR 91.42 billion in FY09 as against INR 72.81 billion in FY 08, reflecting significant improvement in core banking operations, and fee based activities. The Bank is focusing on building healthy earning assets, which has contributed to improvement in profitability. The Bank's operating and net profits increased to INR 12.02 billion (INR 9.54 billion in FY 08) and INR 5.58 billion (INR 4.12 billion) respectively during FY09 scaling new heights in profitability.

Even during the current downturn in the economy, the Bank has maintained its treasury operations reasonably well. During FY09, the total gross Investments of the Bank increased by 19.31 per cent. The total gross investments of the Bank as on 31.03.2009 stood at INR 293.85 billion.

In FY 09, the Bank's CASA deposits stood at 24.11% (25.65% in FY08), which is significantly lower than its peers' average of 30.78%. The Bank has recorded lower capital adequacy ratio 0f 9.75% under Basel I norms in FY 09, as against 10.09% in FY08, which is also significantly lower than its peers' average of 12.49%. Similarly, the Bank's Tier I capital stood at 5.05%, which is 358 bps lower than that of peers in FY 09.

Brickwork expects that the current unstable global economic conditions and the resultant effects on the Indian economy may put some pressure on the Bank's asset quality and the earnings. However, with the consistently improving risk management practices, the efforts being made to bring about better efficiency and improve performance, and the Government of India's expected support in improving Bank's Capital Adequacy, Brickwork Ratings feels that the Bank will be in a better position to face the present challenging times and has assigned Positive Outlook for the Bank's proposed issue.

Copyright ©, 2009, Brickwork Ratings.

Brickwork Ratings has assigned the rating based on the information obtained from issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. Brickwork has the right to change, suspend or withdraw the ratings at any time for any reasons.


CONTACT DETAILS
A Suresh Kumar, Ph.D, Analyst Contact, Brickwork Ratings, +91 (80) 40409940, suresh.kumar@brickworkratings.com
Praveen, MBA, Analyst Contact, Brickwork Ratings, +91 (80) 40409940, praveen.prakash@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, +91 (80) 40409940, media@brickworkratings.com
K N Suvarna, Sr. VP - Business Development, Relationship Contact, Brickwork Ratings, +91 (22) 24304902, kn.suvarna@brickworkratings.com

KEYWORDS
CONSUMER, ECONOMY, MARKETING, BANKING, BUSINESS SERVICES, Financial Analyst, STOCK EXCHANGES

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