UCO Bank's net profit for the quarter ended September 30, 2012 halved from a year ago to Rs 103 crore as non-performing assets mounted after its loans to Sterling Biotech turned bad. Slow growth in net interest income and erosion in margin also contributed to the decline in post-tax profit.
"There was slippage of about Rs 1,500 crore during the quarter with one group alone responsible for Rs 820 crore non-performing asset," Arun Kaul, chairman and managing director of UCO Bank, told reporters in his post-earnings comments. He declined to name the company.
However, senior executives with UCO Bank confirmed that the account represents loans to Sterling Biotech, which has borrowed around Rs 5,000-6,000 crore from a group of banks. They, however, said efforts were made to recover the money from Sterling Biotech and the account may be upgraded in the current quarter resulting in provision write-back.
Provisions for non-performing assets nearly doubled from a year ago to Rs 435 crore as gross bad loan ratio deteriorated to 4.88% at the end of September, 2012 from 3.64% a year earlier. Net non-performing asset ratio also increased by 83 basis points to 2.94% at the end of the quarter.
The bank restructured Rs 900 crore loans during the quarter. Its restructured loan portfolio was around 6% of its advances at the end of September, 2012.
Net interest income, or the difference between interest income and interest expense, was almost flat growing 0.3% year-on-year to Rs 1,013 crore. Net interest margin narrowed 60 basis points to 2.24% in July-September quarter.
Advances increased by 24% while deposits expanded by 23.8%. Kaul said the bank aims to grow its advances and deposits by 16-17% in the current financial year.
The bank closed the quarter with a capital adequacy ratio of 12.27%. It has requested the government to provide Rs 1,500 crore to strengthen its capital base.
