Hectic buying was seen on UCO Bank’s stock which surged limit up 20 percent for the second day in a row on record volumes.
UCO Bank, India’s 8th most valuable PSU bank, said the Supreme Court’s 'landmark' judgement on the supremacy of financial lenders above operational creditors will help bleeding banks recover thousands of crore rupees from defaulting companies in the coming quarters. This should help shore up the battered balance sheets of these banks, mostly state-owned.
UCO bank shares hit a four-month high of Rs 18.70 on Nov 20. They rallied 20% for the second consecutive trading session and trading has been frozen at the upper end of the intraday circuit filter as there are only buyers. UCO is the second best performing PSU bank stock for the month so far, having risen 59%.
Hectic buying was seen on UCO Bank’s stock which surged limit up 20% for the second day in a row on record volumes. In just two sessions, UCO trades at its highest level in 4-months, making it the second best PSU bank in a month. The stock has surged 59% in this period.
India’s top court’s ruling in the Essar Steel vs Arcelor Mittal case favored financial creditors above operational lenders in case a company went under the bankruptcy code. As a consequence, banks, and mainly PSU lenders, saw heavy buying as they would be able to recover unpaid loans from recalcitrant promoters and write back provisions to their balance sheets.
UCO Bank had lent Rs 400 cr to Essar Steel. Goel said the lender had made a provision of Rs 360 cr out of this amount and will write back this entirely to its quarterly profit. Goel expects about RS 1,500 cr worth of bad loans to turn good and the entire amount being added back to his annual profits. The bank was in losses for the past 16 quarters, he said.
More than Rs 16,190 cr are stuck as bad loans in 200 accounts at UCO, Goel added. He expects loans from Alok Industries, Bhushan Steel, Ruchi Soya and Videocon Ltd to be resolved `by Dec’.
`Thus, the provisioning which has been made will be reversed,’’ he added.
Goel expects UCO’s gross non-performing assets to slide dramatically by 300 basis points each quarter over the next half year. UCO’s GNPAs stand at 21.87 percent of his lending portfolio.
“By March 2021 we will bring this GNPA to 10%,’’ Goel said, adding his stock and other PSU banks are ` still undervalued’ at current prices despite the sharp rally.
At the current market price of Rs 18.70 per share, UCO Bank’s market capitalization stands at Rs 16,000 cr. The stock had peaked at Rs 152 in November 2010.
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