Brickwork Ratings assigns 'BWR AA+' for UCO Bank's lower Tier-II bonds

Brickwork Ratings has assigned BWR AA+ (Stable) rating to the Kolkata based public sector lender UCO Bank's proposed tier - II bond issue of Rs 1000 crore.

Rating agency said the rating indicates high degree of safety in servicing of financial obligations and has low credit risk.

The rating has been assigned taking into account the financial performance of the bank, publicly available information and clarifications sought from the bank it added.

The rating also factors government's higher stake in the bank at 65.19%, satisfactory credit growth and comfortable capitalisation however it also has considered high non performing assets (NPA), high number of restructured accounts and falling net interest margins (NIMs) and lower CASA ratio. 

At the end of September quarter banks business grew 24% year-on-year with equal growth in credit and deposits. However its NPA were at quite elevated levels with gross NPA rising to 4.88% from 3.64 an year ago while net NPA rose to 2.94% from 2.11%. Its provision coverage ratio (PCR) was less than 50% at 49.13%.

 

Despite of lower provisions the bank had reported 55% decline in net profit at Rs 104 crore in September.

The bank’s capital adequacy ratio (CAR) stood at 12.27% with Tier I capital  at 8.14%.

The bank has comfortable capitalisation level and has sufficient headroom available under both Tier I and Tier II to raise capital, Brickworks said.