Uco Bank Set To Post Marginal Profit

Calcutta-based Uco Bank is all set to earn an operating profit at the end of the current financial year though it will be a marginal one, according to chairman-cum-managing director Sharda Singh.

He was confident of reversal of the performance profile of the bank, which for decades incurred losses except for 1995-96 when a small operating profit was experienced.

The banks total accumulated loss now stands at Rs 1639.91 crore.

In 1996-97 the loss at Rs 210.75 crore was lower than Rs 236.66 crore incurred in 1995-96. Stemming the loss is not the only good news for Sharda Singh who exuded confidence that the central government would infuse a capital fund of around Rs 350 crore to Uco Bank this month.

 

This fund is expected under a recapitalisation programme worth Rs 2,700 crore the centre has set aside for the ailing public sector banks through an ordinance issued recently.

The central government had earlier in 1996-97, infused Rs 54 crore to Uco Bank as a result of which its total paid-up capital stood at Rs 1714.52 crore.

After the fresh recapitalisation programme, the banks paid-up capital is slated to go up to Rs 2,064.52 crore.

Sharda Singh will hold a meeting with the top officials of the ministry of finance and Reserve Bank of India on 10 February who are expected to review the three-year strategic revival plan of Uco Bank which has been put under implementation since mid-May of 1997.

The reason why Sharda Singh feels there will be better results on profit-loss account is better performance on three areas viz, deposit mobilisation, credit offtake and investment income.

Uco Bank has recorded a 13 per cent growth in deposit mobilisation, since operation of strategic revival plan, which is higher than the national average of 10.6 per cent. In the case of credit offtake, the increase is of 4-5 per cent over that of 1996-97.

The bank has earned a very high investment income which has been primarily wrested through acquiring government securities, debentures of the financial institutions and those of top corporate bodies.

It has been found that over Rs 700 crore has been earned through this route.

However, non-performing assets (NPA) and non-interest income appear to be matter of concern for the bank. Sharda Singh admits that recovery under NPA will be lower than the budgeted 20 per cent reduction in that portfolio. Similarly, income under draft issue, fee-based income, sales of investments and foreign exchange earnings have not given the desired results thereby bringing down non-interest income.

Though Uco Bank is struggling hard to bring it back into health, its overseas branches have shown commendable performances in spite of the fact that four of its five branches are located in South-east Asia, which has been experiencing currency turmoil. This is ascribed to the strategy that two each of the branches at Hong Kong and Singapore have avoided investments in real estate, the prime area of speculations in S E Asia. Moreover, these branches have very limited exposure to currencies other than local currencies. International currency fluctuations did not have great effect due to prudent norms followed by them to avoid any mismatch in maturity and interest obligation. The branches maintained it at much below the permissible level.