With net profit growing at 23%, UCO Bank MD & CEO Ashwani Kumar said that he expects ROA at 1% by FY27-end.He tells Christina Titus and Mahesh Nayak, that there will be margin expansion in FY27 via deposit repricing, with net interest income scaling in line with advances.
What will drive FY27 growth?
If you look at our composition of our business, 65% is our retail, agri and MSME and around 35% is our corporate loans. Retail book is growing around 25%, agri at 25% and MSME at 19%. The growth pattern is almost the same in the last 7-8 quarters. Our FY27 strategy prioritises balanced growth across all segments.
Are you seeing any impact from the West Asia crisis?
As of now, we have not seen much impact on our MSME book. From the corporate side, we do not see any impact because we do not have major exposure to any of the corporates which are directly affected. While some stress is possible, it’s minimal, as our SMA (special mention account) book over Rs 1 crore is just 0.45% of gross advances.
Have you taken any precautionary measures?
We have already tightened our BRE while extending the loans. We have also strengthened our credit monitoring vertical. We are monitoring every account of more than Rs 1 crore from the head office at a very senior level, Rs 50 lakh and above SMA accounts at general manager level. Consequently, overall SMA ratio has improved to 4% of the total book, down from 9-10% 3-4 years ago.
Your NII is down 3% YoY in the quarter. What factors have contributed to this?
There was a one-time exceptional interest income of Rs 283 crore booked in last March quarter. If we normalise that, we will see growth in the March quarter YoY basis. This is the reason for the decline. As deposit rates haven’t fully aligned with repo rate cuts, I expect them to ease slightly this year—lowering overall funding costs and keeping NII proportional to advance growth in FY27.
Where do you expect margin in FY27?
Our March quarter NIM exceeded 3%. We’ll aim to sustain above 3%, though guidance is conservatively set at 2.8-2.9%.
What is your guidance for return on assets?
Our ROA is improving every quarter, and it is a play of profitability. Net profit has grown 22% in the quarter. I expect the profitability to grow and ROA to improve on its own and we will be nearing somewhere around 0.95-1% by the end of next year.
Advances have grown around 19%, but you projected FY27 growth at 12-14%?
For last 2-3 years, guidance has been always in the range of 12-14%. However, actual credit growth in FY25 was 17% and in FY26, it was 19%. So, we have always been surpassing our guidance. But looking at the economic scenario, we always give a very conservative guidance. I expect that we will beat our credit growth guidance this year too due to robust domestic consumption.