UCO Bank Reports 10% Rise in Q1 Profit, Asset Quality Improves
UCO Bank on Monday posted a 10% year-on-year growth in net profit for the first quarter of FY26, with earnings reaching INR 607.44 crore. The performance was underpinned by higher treasury income and a steady rise in fee-based earnings, even as the bank navigated a tight interest rate environment.
Interest income rose by 7% to INR 6,436 crore, while other income largely supported by treasury operations and fees grew 19% to INR 997.2 crore. Interest expenses, on the other hand, increased in tandem to INR 4,032 crore. As a result, the bank’s net interest income (NII) stood at INR 2,403 crore, marking a 6.61% year-on-year increase.
Despite the overall growth, the bank’s domestic net interest margin (NIM) declined slightly to 3.18% from 3.22% in the March quarter and 3.29% in the same period last year.
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Addressing the margin pressure, Managing Director and CEO Ashwani Kumar said, “We had earlier guided for NIM in the range of 3–3.10%, but with front-loading of rate cuts, we now expect NIM to be in the 2.9–3.0% range.”
Retail and MSME Lending Drives Loan Book Expansion
Gross advances saw a healthy growth of 16.48% year-on-year, reaching INR 2.25 lakh crore, ahead of deposit growth, which stood at 11.37% (INR 2.98 lakh crore). Domestic advances, which form the bulk of the loan book, rose 20% to INR 1.99 lakh crore.
The uptick was led by strong momentum in retail and MSME lending. The retail portfolio expanded by a robust 30.73% to INR 56,195 crore, while MSME loans increased by 20.33% to INR 39,771 crore. Agriculture loans also grew, reaching INR 29,961 crore from INR 25,950 crore a year earlier.
Together, the retail, agriculture, and MSME (RAM) segments made up 63% of the domestic loan book. “Retail growth was particularly strong home loans rose 18%, vehicle loans surged 67%, personal loans grew 47%, and pooled assets more than doubled,” said Kumar. He, however, tempered expectations, noting that such high growth levels may not be sustained in the coming quarters.
Corporate loans also expanded, rising 15% year-on-year to INR 74,051 crore.
Improved Asset Quality, Controlled Slippages
Asset quality showed signs of further strengthening. The gross non-performing asset (GNPA) ratio declined to 2.63% from 2.69% in March 2025, while the net NPA (NNPA) ratio improved to 0.45% from 0.50%.
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Fresh slippages during the quarter stood at INR 631 crore, which translates to 0.29% of standard advances. “The slippage ratio of 1.18% is within the 1–1.25% guidance we had given for the year,” Kumar added.
Outlook: Moderation Ahead, but Fundamentals Strong
Analysts noted that while profitability grew year-on-year, a slight moderation from the March quarter may signal a cautious outlook for the coming months.
“UCO Bank’s performance reflects sound operational fundamentals, even as the banking sector faces margin pressures,” said Bhavik Joshi, Business Head at INVasset PMS. “Steady loan growth, improved asset quality, and prudent risk management position the bank well for stability and gradual expansion.”
Shares of UCO Bank closed 1% lower at INR 31.79 on the NSE following the earnings announcement.
Disclaimer: This post is for general informational purposes only. It does not constitute financial advice. Please consult a qualified professional before making financial decisions.
