A Kolkata-based mid-sized PSU bank has been expanding its operations in largely under-banked parts of the country with 61% of its 3,327 domestic branches in rural and semi-urban regions at the end of the December 2025 quarter. This bank has a strong presence in the eastern and north-eastern parts of the country.
We are talking about UCO Bank, which is largely hidden away from the financial media, and this bank trades at relatively attractive valuations.
Uco Bank trades at about one times book value. Effectively what this means is that if the book value of the bank is Rs 100, it is available for purchase for Rs 100. In contrast, State Bank of India (SBI), the largest PSU bank, trades at a price to (standalone) book value of nearly 1.9 times.
Let’s dig in to figure out what’s really going on with Uco Bank.
The financial performance of this Kolkata-based PSU bank has shown a strong improvement in the December 2025 quarter and that was owing to strong growth in its loans.
Uco Bank Q3 Results: Retail and Agri Loans Fuel Growth
Operational performance in the December 2025 quarter
| Parameter | Uco Bank | SBI |
| Net Interest Margin (Domestic %) | 3.27% | 3.12% |
| Loan Growth (YoY %) | 17.2% | 15.7% |
| Net Profit Growth (YoY %) | 15.8% | 24.5% |
| Standalone ROA (Annualised %) | 0.83% | 1.19% |
Uco Bank’s advances grew 17.2% y-o-y to Rs 2.38 lakh crore in the December 2025 quarter, and that was thanks to strong growth inretail, SME and agriculture loans.
SBI also grew its advances by 15.7% y-o-y to Rs 46.27 lakh crore in the December 2025 and that was also thanks to retail and SME loans.
Retail loans and loans to smaller enterprises enable banks to earn a higher rate of interest on loans / credit as against loans to top rated corporates and help them manage the pressure on NIMs.
For a key operational parameter, Uco Bank’s net interest margin (NIM) for domestic operations was 3.27% in Q3FY26 as against 3.38% a year earlier.
Larger rival, SBI’s NIM in its key domestic operations was 3.12% in the December 2025 quarter as against 3.15% a year earlier.
The RBI had cut repo rates in its meeting in early December 2025, and while interest rates on bank loans / credit facilities have come down, interest rates on deposits with the bank come down with a lag. This has created temporary pressure on NIMs.
Asset quality improves and drives net profit growth
Asset quality of Uco Bank has also been fairly good — its percentage of non-performing assets was 0.36% in the December 2025 quarter vis-a-vis 0.63% a year earlier.
Provisions for nonperforming loans at UCO Bank were Rs 278.9 crore in Q3FY26, a rise of 5.7% y-o-y. The provision coverage ratio (PCR) for Uco Bank was 97.3% in the December 2025 quarter as against 96.16% a year earlier. Provisioning by UCO Bank is well above regulatory requirements of RBI.
Strong loan growth helped UCO Bank’s net profit rise 15.8% y-o-y to Rs 739.5 crore in the December 2025 quarter.
Larger rival, SBI’s provisions for non-performing assets was Rs 3,215.7 crore in the December 2025 quarter vis-a-vis Rs 2,305 crore a year earlier. The largest bank in the country has highlighted that its provision coverage ratio was 75.5% at the end of the Q3FY26, higher than 74.6% reported a year earlier.
SBI’s % of net NPAs was 0.39% in the December 2025 quarter as compared to 0.5% a year earlier.
Strong growth in retail and SME loans also helped SBI’s standalone net profit rise by 24.5% to Rs 21,028 crore in Q3FY26. The bank has highlighted its highest ever quarterly profit declared.
Return on Assets: How Uco Bank Stacks up
Uco Bank’s return on assets (annualised) was 0.83% in the December 2025 quarter.
SBI has highlighted its return on assets (net asset basis – annualised) was 1.19% in Q3FY26.
For context, HDFC Bank and Kotak Mahindra Bank have one of the highest RoAs in the banking industry, over the past several quarters. Kotak Mahindra Bank and HDFC Bank enjoyed identical return on assets (RoA) in the third quarter of FY26.
The return on average assets (not annualised) was 0.48% in the December 2025 quarter for both banks, and on annualising it for FY26 it would be nearly 1.92%.
Growth outlook – Impact of Middle East crisis
The current war in the Middle East has cast a shadow on the growth of the domestic economy, with shortages / constraints of international supplies of oil and compressed natural gas (CNG). This in turn has disrupted the daily operations of several industries including tiles, hotels and restaurants, amongst others.
The central government is taking steps to reduce the impact of shortages of various crude oil products from the Middle East, and the full impact will be visible over the next few weeks.
Investors on Dalal Street will be closely monitoring any rise in NPA levels in the broader banking system over the next few quarters from the above crisis.
The Middle East crisis has come at a time when the RBI has taken several steps earlier to lower rates and boost lending in the broader banking systems.
The country has also entered into Free Trade Agreements (FTA) with several countries and that is also expected to create new banking opportunities over the next few quarters.
Uco Bank has guided for loan growth of 12%-14% for FY26 and NIM in its global operations of 2.8%-2.9%. Investors will be closely monitoring loan growth and other operational parameters of Uco Bank, SBI and other leading banks.
Valuation Gap: Why Uco Bank is a Value Play Compared to SBI
Valuations at a glance
| Valuation Metric | Uco Bank | State Bank of India |
| Standalone P/E (x) | 12.6 | 13.3 |
| Price-to-Standalone Book Value (x) | 1.0 | 1.9 |
The Uco Bank stock ended 1.5% lower at Rs 26.5 on Wednesday, and it is hovering just above its 52-week low of Rs 24.7 that was reached on 2 March, 2026. The Gulf crisis has impacted investor sentiment on Dalal Street and also hit Uco Bank.
Uco Bank trades at a P/E of 12.6 times, according to Screener.in, while SBI trades at a standalone P/E of 13.3 times.
On the preferred valuation matrix, price to book value, Uco Bank trades at one time. Over the past five years, it has traded between 0.5 times and 2.7 times.
On price to (standalone) book value, SBI trades at 1.9 times, according to Screener.in. Over the past five years, it has traded on the above valuation matrix between 1.3 and 2.3 times.
Uco Bank trades at reasonable valuations and investors could add this stock to their watchlist for 2026.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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