Regulators, analysts and investors have to periodically assess the financial condition of each bank. This is done by the CAMELS Model where in the Banks are rated on various parameters, based on financial and non-financial performance.
Bank supervisory authorities assign each bank a score on a scale of one (best) to five (worst) for each factor. If a bank has an average score less than two it is considered to be a high-quality institution, while banks with scores greater than three are considered to be less-than-satisfactory establishments. The system helps the supervisory authority identify banks that are in need of attention.
CAMELS is an acronym, where each letter refers to a specific category of
performance.
C - Capital Adequacy
A - Asset Quality
M- Management
E- Earning Performance
L- Liquidity
S - Systems
BANK OF MAHARASHTRA
Bank of Maharashtra is an Indian bank was established in the year 1935 with an initial authorized capital worth Rs. 10.00 Lacs, although it became operational in the early phase of the next year. The bank got nationalized by the Government of India in the year 1969. With a total number of 1421 branches located all over India as of April 2009, the bank claims to have the largest number of branches within the state of Maharashtra, among all the Public Sector banks. Commonly known as a common man's bank, Bank of Maharashtra adopts a philosophy of "Technology with personal touch", and follows its motto stating "One Family, One Bank, Bank ofMaharashtra".
Facilities:-
All the branches of Bank of Maharashtra have been fully computerized, with Depository services and Demat facilities being offered at 131 branches as of April 2009. The bank aims at increasing its ATM network from 345 to 500 soon, apart from planning to install Biometric ATMs at some selected branches. Apart from it, introduction of Phone Banking, Internet Banking and Mobile Banking is also on cards.
Capital Adequacy
It indicates the bank's capacity to maintain capital commensurate with the nature of and extent of all types of risks, as also the ability of the bank's management to identify, measure, monitor and control these risks.
Capital Adequacy Ratio:
Capital adequacy ratio was comfortable at 12.76 % as against minimum prescribed level of 9.00%. Tier I capital was 6.85 %.
1. Profitability
Net profit for the quarter increased to Rs. 100.38. crore as against Rs. 74.32 crore for the corresponding period of the previous year, registering growth of 35.06 %. Operating profit remained at Rs. 172.51 crore for the quarter as against Rs.171.34 crore for the corresponding period of previous year inspite of additional outgo on IT expenditure, an initiative taken by the Bank last year by introducing core banking solution. Total income during the quarter increased to Rs. 985.97 crore from Rs. 765.30 crore during the corresponding period of previous year, registering a growth of 28.83 %. The interest spread increased from Rs. 268.74 crore to Rs. 300.61 crore registering growth of 11.86 %.
2. Total business
Total business reached the level of Rs. 65690 crore registering growth of 27.06 % over December 2009.
3. Advances
Gross advances stood at Rs. 27,685 crore as on 31.12.2009 as against Rs. 21,148 crore as on 31.12.2008 registering a growth of 30.91 %. The yield on advances has improved from 8.72% to 10.12 %. Priority sector advances formed 45.40% of net bank credit as against minimum stipulated level of 40%. Agricultural advances increased from Rs.3,490 crore to Rs. 4,370 crore, an absolute increase of Rs. 880 crore . Lending to SME segment, which is a thrust area, increased from Rs. 1,847 crore as on 31.12.2008 to Rs. 3,308 crore as on 31.12.2009 registering a growth of 79.10 % Y-O-Y Lending to weaker section increased from Rs. 1,232 crore to Rs. 1,633 crore, an increase of 32.55 %. Retail advances stood at Rs. 4,103 crore as on 31.12.2009 and constituted 14.82 % of total advances as against Rs.3,417 crore as on 31.12.2008 showing a Y-O-Y growth of 20.08 %.
4. Efficiency of capital
The return on Assets (ROA) improved to 0.94 % as on 31.12. 2009 as against the
level of 0.86 % as on 31.12.2008.
Asset Quality
Gross NPA of the Bank stood at Rs. 1017 crore as at the end of the quarter, as compared to Rs. 746 crore as on 30.06.2008; the Gross NPA ratio 2.94 % as on 30.06.2009; Net NPA of the Bank has gone up to Rs. 462 crore as at the end of the quarter as compared to Rs. 255 crore as on 30.06.2008; the Net NPA ratio stood at
1.36% as on 30.06.2009; Provision coverage of NPA stood at 52.38% as on
30.06.2009.
PROFIT
The Operating Profit and the Net Profit for the quarter ended 30.06.2009 increased by 37.60% and 118.30% respectively, on year on year (Y-o-Y) basis; During the first quarter (Q1) of the financial year 2009-10 (FY 2009-10), the Bank's Operating Profit and Net Profit stood at Rs. 180.30 crore and Rs. 101.79 crore respectively, up from Rs 131.04 crore and Rs. 46.63 crore for the corresponding quarter of the previous year.
INCOME
The growth of profit was due to the rise in Total Income for Q1 of FY 2009-10, by 23.28 % on Y-o-Y basis; the total income for the quarter ended 30.06.2009 stood at Rs. 1282.96 crore as against Rs. 1040.68 crore for the quarter ended 30.06.2008. The Interest Income recorded a growth of Rs. 142.17 crore (14.56 %) on Y-o-Y and stood at Rs. 1118.87 crore as on 30.06.2009, up from Rs. 976.70 crore for the quarter ended 30.06.2008.
MANAGEMENT
It signals the ability of the Board of Directors and Senior Managers to identify, measure, monitor and control risks associated with banking, this qualitative measure uses risk management policies and processes as indicators of sound management.
Corporate Governance - Model Code of Conduct
Need and objective of the Code
Clause 49 of the Listing Agreement entered into with the Stock Exchanges, requires, as part of Corporate Governance the listed entities to lay down a Code of Conduct for Directors on the Board of an entity and its Senior Management. Senior Management has been defined to include personnel who are members of its Core Management and functional heads excluding the Board of Directors.
The Bank expects all Directors and members of the Core Management to exercise good judgement to ensure the interests, safety and welfare of customers, employees and other stakeholders and to maintain a co-operative, efficient, positive, harmonious and productive work environment and business organisation. The Directors and members of the Core Management while discharging duties of their office must act honestly and with due diligence. They are expected to act with that amount of utmost care and prudence which an ordinary person is expected to take in his / her own business. These standards need to be applied while working in the premises of the Bank at off-site locations where the business is being conducted whether in India or abroad at Bank sponsored business and social events or at any other place where they act as representatives of the Bank.
Employment / Outside employment - The members of the Core management are expected to devote their total attention to the business interests of the Bank. They are prohibited from engaging in any activity that interferes with their performance or responsibilities to the Bank or otherwise is in conflict with or prejudicial to the Bank.
Business interests - If any member of the Board of Directors and Core Management considers investing in securities issued by the Bank's customer, supplier or competitor, they should ensure that these investments do not compromise their responsibilities to the Bank. Many factors including the size and nature of investments; their ability to influence Bank's decisions; their access to confidential information of the Bank or of the other entity and the nature of relationship between the Bank and the customer, supplier or competitor should be considered in determining whether a conflict exists. Additionally, they should disclose to the Bank any interest that they have which may conflict with the business of the Bank.
Related parties - As a general rule, the Directors and members of the Core Management should avoid conducting Bank's business with a relative or any other person or any firm, company, association in which the relative or other person is associated in any significant role.
Applicable Laws
The Directors of the Bank and Core Management must comply with applicable laws, regulations, rules and regulatory orders. They should report any inadvertent
non-compliance, if detected subsequently, to the concerned authorities.
Use of Bank's Assets and Resources:
Each member of the Board of Directors and Core management has a duty to the
Bank to advance its legitimate interests while dealing with the Bank's assets and
resources. Members of the Board of Directors and Core management are prohibited from:
- using corporate property, information or position for personal gain ;
- soliciting, demanding, accepting or agreeing to accept anything of value
from any person while dealing with the Bank's assets and resources;
- acting on behalf of the Bank in any transaction in which they or any of
their relative(s) have a significant direct or indirect interest.
EARNINGS
-The total earnings of the Bank grew to Rs.3,820.75 crore from Rs.2,987.09
crore depicting a revenue growth of 27.91%.
-The non interest earning has been a key focus area for the Bank during the current year also. Non interest earning went up to Rs.280.17 crore from Rs 265.05 crore.
-The Bank has been looking at new avenues to shore up the income and has been consolidating its banc assurance, mutual fund distribution and Government business.
-Commission, exchange and brokerage earning increased by Rs.42.57 crore reflecting a growth of 25.71 per cent.
LIQUIDITY AND INTREST RATE RISK
Considering stable resource base and excess SLR, liquidity position of BoM is satisfactory. There are no negative liquidity mismatches in the one-year time frame as per the Asset-Liability Management (ALM). BoM was able to reduce the modified duration of its AFS portfolio.
SYSTEM
It's a recent addition to the ratings parameters and reflects the degree to which changes in interest rates, exchange rates, commodity prices and equity prices can affect earnings and hence the bank's capital.
Beta <1, depicts that changes in the firm are less than the changes in the market. Less Sensitive
Beta =1, depicts that there is equivalent change in the firm with the changes in the market Equally Sensitive.
Beta >1, depicts that changes in the firm are more than the changes in the market. Highly Sensitive.
INTRODUCTION OF UCO BANK
The bank is a dominant player in the eastern parts of the country. It has nearly 2000 Service Units spread all over India and also operates in two Major International Financial Centers namely Hong Kong and Singapore. The bank has correspondents/agency arrangements all over the world to help in its overseas business. Foreign exchange business is conducted in more than 50 centres in India. The Bank has foreign exchange position maintaining offices in four centres in the country.The bank is a dominant player in the eastern parts of the country.It has presence in other parts as well. The bank's distribution channel consists of 2,065 branches, 4 overseas branches, and 2 representative offices. The bank's product and services consist of NRI banking, foreign currency loans, finance to exporters, forex and treasury services, payments, receipts, and remittance.
The Government of India (GoI) is a major stakeholder of UCO Bank with ownership stake of 74.98%.
Key Ratios UCO
Capital Adequacy
CRAR 9.75%
Tier I 5.05%
Asset Quality (As % of Advances)
Gross NPA 2.21%
Net NPA 1.18%
Earnings
NIM 1.75%
Non-Interest Income (INR Billion) 10.20%
ROA 0.59%
Cost to Income Ratio 54.89%
Liquidity
CASA 24.11%
Credit Deposit Ratio 68.98%
Operating Ratios
Cost of Deposits 7.25%
Yield on Advances 10.67%
CAPITAL ADEQUACY RATIO
The Capital Adequacy Ratio at 11.50% is well above the minimum required level of 9% as on December 31, 2009. Receiving capital infusion of Rs 500 crore from the Government under the recapitalisation scheme by the end of this fiscal. This will boost our capital adequacy ratio and we will also be able to fund our growth needs, so we do not have immediate plans to go to the market.
UCO Bank has the lowest capital adequacy ratio as on 31st march 2009 , the CRAR under Basel I was 9.75%, which has significantly declined from 10.09%
for the same period a year ago. Similarly, the bank's tier I capital stood at
5.05%, bank put in place new capital adequacy framework to look after the Basel II norms implementation. The Bank has adopted the Standardized
Approach for Credit Risk and Basic Indicator Approach for Operational Risk under the Revised Framework with effect from 31st March 2008. As on 31st March 2009, the Bank capital adequacy under Basel II is 11.93%.
ASSET QUALITY
The bank 's asset quality has improved during FY 2009.. As a result, the bank's gross and net NPAs had come down to 2.21% and 1.18% respectively during the year.
Management - UCO Bank
Name
Designation
S K Goel
Chairman and Managing director
S K Sinha
Nominee Director
J C Shandil
Employee Director
R N Jain
Shareholder Director
Sanjeev Jain
Non Official Director
Ram Avtar Sharma
Director
Name
Designation
V K Dhingra
Executive Director
N P Sinha
Nominee Director
S C Gupta
Shareholder Director
Jai Dev Gupta
Non Official Director
Ajai Kumar
Executive Director
EARNINGS
UCO Bank's net profit rose 43.22 per cent to Rs 245.8 crore in the third quarter of 2009-10 compared to Rs 171.6 crore registered in the corresponding period last fiscal,
Total income increased from Rs 2,433.52 crore in the quarter ended December 31, 2008 to Rs 2,608.76 crore in the period under review
The bank expects its net interest margin (NIM) at 2.5 per cent in the January-March quarter of the current fiscal, up from 2.34 per cent in the third quarter.
The share of high-cost bulk deposits has fallen from 27 per cent in April to 5 per cent in December,
The capital adequacy ratio (CAR) has fallen to 11.45 per cent in December 2009 against 11.93 per cent in March 2009.
'The CAR is expected to touch 12 per cent once the government releases Rs 750 crore,
The bank's advances have gone up 22.03 per cent year-on-year to Rs 13,416 crore during the third quarter while deposits were up 19.78 per cent to Rs 17,186 crore.
Particulars
Sept-09
Jun-09
Mar-09
Dec-08
Interest Earned / Operating Income
2384.23
2331.46
2164.28
2125.92
Interest on Advance
1786.91
1784.1
1639.49
1658.86
Income on Investment
535.9
495.27
466.04
426.2
Interest on Balances
60.07
49.6
53.23
37.3
Others Interests
1.35
2.49
5.52
3.56
Other Income
225.59
252.22
356.34
307.6
Total Income
2609.82
2583.68
2520.62
2433.52
Interest Expended
-1858.76
-1904.35
-1789.57
-1675.71
Operating Expenses
-383.45
-369.06
-403.61
-356.19
Payment/Provisions for Employees
-249.55
-253.41
-275.09
-243.32
Total Expenditure for Banks
-2242.21
-2273.41
-2193.18
-2031.9
Profit before Tax
367.61
310.27
327.44
401.62
Tax
-18.53
-4.52
-35.67
-20.97
Provisions and Contingencies
-141.36
-126.9
-217.21
-226.93
Profit after Tax
207.72
178.85
74.56
153.72
Extraordinary Items
#VALUE!
#VALUE!
28
17.91
Net Profit
207.72
178.85
102.56
171.63
Equity Capital
549.36
549.36
549.36
549.36
LIQUIDITY
It takes into account the adequacy of the bank's current and potential sources of liquidity, including the strength of its funds management practices.
This ratio shows the liquid assets in proportion to the total assets.This ratio shows the banks ability to meet immediate cash requirements of customers.A high ratio also shows idleness of funds.The banks has maintained a constant liquid assets to total assets for the last four years.
2008 2007 2006 2005
0.067 0.066 0.061 0.069
SYSTEM
UCO Bank, a leading Public Sector Bank headquartered in Kolkata has, in the last couple of years, implemented many key technology solutions like Core Banking (CBS), Internet Banking (e-banking), onsite / offsite ATMs, Anywhere Branch Banking (ABB), Integrated Treasury System, RTGS, SFMS, NEFT etc. The bank has chosen Finacle Software of M/s.Infosys Ltd., as the Core Banking Solution. The bank's Primary Data Centre is located at Bangalore. The Dept. of IT, HO as well as the D/R Data Centre are located at Kolkata. The bank's Payment System Gateway is located at its Integrated Treasury Branch, Mumbai.
ANANLYSIS OF UCO BANK
While analyzing the UCO Bank's performance for FY 2009, a few shortcomings as under have been noticed.
a) Share of CASA deposits has slipped from 25.65% as of 31st March 2008 to about 24.11% in FY09.
b) Cost of deposits has increased from 6.74% in FY08 to 7.25% in FY09
c) Net interest margin declined from 1.86% in FY08 to 1.75% in FY09
d) CRAR declined from 10.09% in FY08 to 9.75% in FY09.
The rating assigned to UCO Bank is specific to the proposed upper Tier II bonds issue of INR 175 crore or INR 1.75 billion. the current unstable
glo bal economic conditions and the resultant effects on the Indian economy may put some pressure on the Bank's asset quality and the earnings. However, with the consistently improving risk management practices, the efforts being made to bring about better efficiency and improve performance, and the Government of India's expected support in improving Bank's Capital Adequacy, Ratings feels that the bank will be in a better position to face the present challenging times and has assigned Positive Outlook for the bank's proposed issue.
