UCO Bank:::: Prabhudas Lilladher, Banks/Financials conference

􀂄 Growth Outlook: Growth remains benign and Uco bank expects loan growth to
remain within RBI’s projection for the system (~16%). The bank is focussing on
non corporate book with targeted increase in gold loans to Rs15bn, Home loans
from Rs30bn to Rs45bn. Also Uco bank is targeting non-fund based trade
income by increasing their LC business to Rs150bn from Rs85bn now.
􀂄 CASA Initiatives: The bank is targeting at improving CASA balances through
customer acquisition and capturing higher share of flow business. Uco is now
the sole banker for the oil payments made to Iran and CA balances on this
account is has increased to ~Rs 25bn over the past two months, and the bank
see the CA balances increasing further on this count.
􀂄 Other highlights: (1) The bank has bulk deposit of ~30% and inline with FinMin
directive aims to bring dependence down to <15 expects="expects" p="p" significant="significant" uco="uco">reduction in the average age of the employees over next 5 yrs as with ~24000
employees currently, Uco has ~2000 retirements every yr which they are
replacing with a younger workforce (3) Uco’s tier‐I capital is ~8% and
management estimates total capital requirement of Rs140bn over next 5 yrs .

UCO Bank (Rs 84.4): SELL ::Business Line

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QUERY CORNER: Sterlite Industries, UCO Bank, Mahindra Satyam, TVS Motor, Opto Circuits, GTL Infrastructure, Berger Paints, IOB ::Business Line

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Please advise me on the outlook for Sterlite Industries and UCO bank bought at Rs 130 and Rs 65 respectively.

K. Kunhiraman

Sterlite Industries (Rs 113.9): After peaking out in January 2010, Sterlite Industries has been on a long-term downtrend. In August 2011, the stock broke through a key support at Rs 150 and accelerated downwards. But, its long-term support at Rs 86 provided base in December 2011 and the stock changed its direction. Investors with long-term perspective can consider buying the stock on declines with stop-loss at Rs 86. A strong move above the immediate resistance at Rs 130 will take the stock northwards to Rs 150 and to Rs 165 in the long-term. Nevertheless, a tumble below Rs 86 will drag the stock down to the Rs 70 - 74 range.

Short-term trend has been up for the stock ever since bottoming out last month. But it is likely to face key resistance at Rs 120 in the days ahead. Failure to move above this resistance will pull the stock down to Rs 100. Significant supports below this level are at Rs 95 and Rs 86.

Uco Bank – 2QFY2012 Result Update - Angel Broking

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For 2QFY2012, UCO Bank reported a 93.6% yoy increase (down 21.1% qoq)
in its PAT to `231cr, above our estimates, mostly due to higher net interest
income than estimated by us. Reported net interest margin witnessed a
sequential improvement of 38bp. We maintain our Neutral recommendation on
the stock.
Bank further sheds low-cost deposits during 2QFY2012; NIM improves by 38bp:
During 2QFY2012, advances declined by 0.6% qoq (up 12.4% yoy) to `95,549cr,
while deposits increased by 3.0% qoq (up 8.5% yoy) to `131,312cr. The bank
shed `2,000cr worth bulk deposits during 2QFY2012 (`20,000cr in 1HFY2012).
On the deposits side, CASA deposits registered growth of 11.3% yoy. On a
sequential basis, CASA deposits increased by relatively higher 3.9% compared to
overall deposits growth, leading to an increase in CASA ratio by 212bp to 26.3%
in 2QFY2012. The bank’s cost of deposits decreased by 8bp qoq to 7.2%, while
yield on advances increased by 56bp qoq to 11.4%, leading to a 38bp qoq
increase in reported NIM. Asset quality of the bank, however, continued to be
under pressure as the bank switched over accounts worth `50lakhs and below
to system-based NPA during 2QFY2012. Gross NPA ratio as of 2QFY2012
stood at 3.6% (3.5% in 1QFY2012), while net NPA ratio stood at 2.1% (2.2%
in 1QFY2012).
Outlook and valuation: Structurally, the bank has had relatively higher exposure
to large corporates, low CASA of ~26% and low fee income (0.6% of total assets
as of FY2011). Going forward, we expect the bank’s earnings to find support
from its increasing exposure to the SME and retail segments, improving other
income and moderating asset-quality pressures, aided by increasing recoveries.
However, at the CMP, the stock is trading at 0.9x FY2013E ABV, which we believe
factors in the improvement expected in earnings quality. Hence, we maintain our
Neutral recommendation on the stock.

UCO Bank::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
UCO consolidates balance sheet for profitable growth
 UCO Bank's (UCO) new management (Mr Arun Kaul joined in September 2010)
identified four challenges (liability franchise, assets, HR and business process) that
were hurdles in improving the bank's operating metrics and is taking remedial steps
so that the bank can post sustained, profitable growth.
 The management intends to de-bulk (70% of the book towards corporate loans and
30%+ bulk deposits) its balance sheet and focus more on SME and retail segments
on the assets side and retail deposits and CASA deposits on the liabilities side.
Focus on CASA deposits
 Reliance on bulk deposits for rapid growth in the past (31% CAGR over FY07-10),
slow branch and ATM roll out and backwardation in technology led CASA ratio to
decline from 29% in FY07 to 22% in FY11.
 With systems and processes in place and the bank on a 100% CBS platform, UCO is
leveraging its position by offering new products and increasing customer acquisitions.
 Further it aims to increase its branch and ATM network from 2,200 and 800 to 3,000
each by end of FY13 respectively. The new branches and ATM's are being opened to
target new growth areas and increase brand visibility.
 De-bulking of the balance sheet and improved product have led CASA ratio to improve
to ~26% in 1QFY12 and the management expects it to improve further.
Strengthening of the system and process
 Slippages over the past few quarters have been at en elevated level (2% in 1QFY12
and 3.3% in FY11 against 1.6% in FY10) as UCO continued to clean up its balance
sheet and migrated its portfolio (INR0.5m and above) through system-based
recognition of NPAs.
 UCO is expected to transit its remaining portfolio in 2QFY12, which may lead to
further pressure on asset quality, post which slippages is expected to decline.
 UCO has tightened its credit appraisal and divided its offices into four major verticals
(headquarters, regional and zonal offices and branches) against three earlier, to
increase the monitoring and selection process.
 As far as stress assets are concerned, UCO has established a separate recovery cell
and 5-6 separate branches will focus only on recovery of bad assets.
Valuation and view
 The management is taking steps to improve UCO's asset and liability profile, which
in turn helps in improving margins. Near term asset quality pressure is likely to
continue due to system-based NPA recognition. The stock trades at 0.8x PBV and
5.7x PE FY11. Not Rated.

Query Corner: Satyam, Aban Offshore, Amara Raja, UCO Bank, EIH, Jain Irrigation: Business Line

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Please let me know the prospects of Aban Offshore as the stock is sliding down incessantly.

Kudiarasu C. Chidambaram, Bhaskar Parab

Aban Offshore (Rs 643.4):

Aban Offshore could not recover from the drubbing it received in 2008 since the recovery in 2009 could not help it recover even 30 per cent of the loss suffered in the crash.

The structural downtrend resumed from September 2009 peak of Rs 1,682.

In our review of this stock last September, we had written that a strong close above Rs 1,800 is needed to signal that the medium-term view has turned positive for this stock. We had also written that as long as it traded below this level, it can move in a wide band between Rs 500 and Rs 1,800.

Fresh purchases were recommended only on a close above Rs 1,800 with further targets of Rs 2,800 and Rs 3,400.

Aban Offshore recorded the trough of Rs 511 in February and is attempting a feeble recovery since then. Short-term view will turn positive only on a weekly close above Rs 960. Subsequent targets would be Rs 1,225 and Rs 1,680.

However, failure to move above Rs 960 will mean that the stock can move lower to Rs 390. Decline will accelerate on close below this level dragging the stock to the March 2009 trough of Rs 220.

Please give the technical view on Deccan Gold.

T. Thakur

Deccan Gold Mines (Rs 18):

Deccan Gold moved up very steeply from Rs 17 to Rs 142 in the period between October 2007 and January 2008. The decline from this peak was equally sharp and dramatic and the stock collapsed to Rs 12 by October 2008. Investors cannot expect the stock to re-attain this peak anytime soon since the surge took place in the final frenzied stage of a structural bull-market. A more reasonable long-term target for the stock would be the April 2008 peak of Rs 63. The stock could, however, find it difficult to move past Rs 44 in the ensuing months. The trend along the short- and medium-term time frame is currently down and the stock could drift lower to the long-term support around Rs 12. Investors should switch out if it moves below this level. Resistances in the month ahead would be at Rs 26 and Rs 33.

Please let me know the long-term prospects of EIH purchased at Rs 78.

Mukesh Kumar

EIH (Rs 82.3): Key long-term support for EIH that occurs at 61.8 per cent retracement of the stock's structural up-move from 2003 trough occurs at Rs 90. The stock breached this support in February and went on to record the low of Rs 74 in March this year. A strong weekly close above Rs 90 is the first requirement to signal that EIH is on the way to recovery. Else, the stock could move down to test the support zone between Rs 60 and Rs 65. A long-term trough is possible in this region. But investors need to exit the stock if this buttress is penetrated.

Any rally would face strong resistance around Rs 110 and investors with medium-term perspective can take some money off the table if the stock fails to move above this level. Next long-term resistance is at Rs 135.

I am holding Noida Toll Bridge purchased at Rs 48.50. What are the technical levels for the stock? Should I exit or hold?

Madoori Dass

Noida Toll Bridge Company (Rs 27.2): This stock has significant support in the band between Rs 24 and Rs 28. It is hovering in this zone over the last two months. Investors can hold the stock with a stop at Rs 22. There is a likelihood of the stock bouncing from here to Rs 33 or Rs 38. Medium-term view will turn positive only on a close above the second target. Next target is Rs 48.

Since the possibility of your holding moving into profit is highly unlikely over the next year, we suggest you switch out of this stock. Downward risk is also quite high since close below Rs 24 can pull the stock to Rs 20 or even Rs 16.

I hold shares of Mahindra Satyam. Please advise the long-term prospects as also whether the stock can now be purchased at lower level to average cost.

Unnikrishnan

Mahindra Satyam (Rs 66.2): This stock is sliding lower since the peak of Rs 128.6 recorded in September 2009. In our review of this stock in August last year, we had advised investors to hold the stock with stop at Rs 78. We had also indicated then that long-term view would turn negative only on close below Rs 60.

Though the stock has tested the support at Rs 60 several times since December, it has not breached this level strongly.

The strong rebound every time it moves below this level also implies that it is likely to cushion declines in future too.

We move our long-term stop-loss lower to account for short-term blips. Investors can hold the stock with stop at Rs 50. If this level sustains, the stock can move higher to Rs 85 or Rs 102 over the ensuing months. Next long-term targets are Rs 128 and Rs 135.

I have bought Amara Raja Batteries at Rs 181 for a period of six months for a potential upside of 10 per cent. I seek your view on this stock.

Chandra Patnaik

Amara Raja Batteries (Rs 188.6): In our review of this stock in July 2010, we had indicated that short-term traders should divest their holdings on a decline below Rs 180. We had also given the next support at Rs 150.

The stock recorded the low of Rs 150 in February this year and bounced sharply from this zone. Since this level occurs at 38.2 per cent (Fibonacci) retracement of its up-move from March 2009 to October 2010, the long-term view for the stock stays positive. Investors can hold the stock with stop at Rs 145.

The current rally, however, faces short-term resistance at Rs 200. Reversal from here can drag the stock down to Rs 170 or Rs 160 again. You can hold the stock with stop at Rs 180.

If the stock manages to hold above this level, it can rally to its previous peak of Rs 228 again.

What are the technical prospects of UCO Bank purchased at Rs 104 and Jain Irrigation Systems bought at Rs 212?

T.K. Chandrasekaran

UCO Bank (Rs 108.2): UCO Bank had a dream-run to the peak of Rs 152 recorded in November last year. The stock is, however, in a medium-term downtrend since then. Key medium-term support for the stock is at Rs 95 where it is currently halting. Investors can hold the stock as long as it trades above this level on a weekly closing basis.

The stock will face resistance at Rs 115 and Rs 130 in the months ahead. Investors with short- to medium-term perspective should divest their holding on inability to clear either of these levels. Next target would be the previous peak of Rs 152.

The long-term view will, however, deteriorate on a close below Rs 92 since the stock can then plummet to Rs 87 or Rs 72.

Jain Irrigation Systems (Rs 180.9): Jain Irrigation is also in a medium-term decline since the peak of Rs 264 recorded in August 2010. The stock is currently halting at the key support at Rs 180. If it manages to hold above this level, it would be construed as positive from a medium-term perspective and the stock can then move higher to Rs 264 and then Rs 310. Investors should, therefore, hold the stock with stop at Rs 170.

Supports on a move below Rs 170 are Rs 155 and Rs 130.

52-WEEK BLOCKBUSTER: UCO BANK::Business Line

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UCO Bank, one of the top performers in the banking sector, returned 75 per cent to its investors in the last one year. The gains by UCO Bank were partly due to the fact that the government has infused close to Rs 2,513 crore (this includes the Rs 940 crore expected to be infused this quarter) over the last two and half years into the bank. This has helped the bank to considerably improve its Tier-1 ratio from less than six per cent to over eight per cent. Even as the quantum of capital infusion was high, the equity dilution was limited given that Rs 1,573 crore of the total infusion came by the way of hybrid instruments (perpetual non-cumulative preference shares) whose cost of capital is lower than the cost of equity. The capital adequacy ratio improved from 11.45 per cent in December 2009 to 13 per cent in December 2010.

Additionally, the bank has also managed to improve its operational parameters over the one-year period ended December 2010, with net interest margin improving by 77 bps to 3.11 per cent, cost-income ratio falling by 6.3 percentage points to 40 per cent and credit-deposit ratio improving to 73.7 per cent from 71.4 per cent. However, higher provisioning and asset quality slippages continue to be a drag on the financials.

The price-to-book value of the bank improved to 1.5 times the December 2010 book value as compared to 1.1 times a year ago

UCO Bank, UCO IN,:: HSBC - India Investor Conference Highlights

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Focus on CASA to offset high borrowing costs
 Targeting 1000 ATMs by FY11 and 3000 by FY13.
 Targeting 70% provision coverage by March 2011.
 Deposit growth has been lower as bank has consciously shed long-term high deposits.
 Reliance on short-term CDs has increased to take repricing advantage when interest rates decline.
 Plans to scale up presence in CASA-rich North Indian states like UP.
 Targeting to take CASA up to 30% in one year.

Uco Bank – 3QFY2011 Result Update - Angel Broking

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Uco Bank – 3QFY2011 Result Update

Angel Broking maintains a Neutral on Uco Bank.

Uco Bank announced its 3QFY2011 results today, registering a robust growth in
net profit of 22.5% yoy and 152.7% qoq to `301cr, well above our estimates. This
was mainly because we had been factoring in one more quarter of cleaning up
on the NPA front. However, the bank reported ~`100cr lower NPA provisioning
than expected for 3QFY2011 and will meet the 4% shortfall (~`110cr) in
4QFY2011.We maintain our Neutral recommendation on the stock.

UCO Bank- Future Re‐rating candidate:: Networth capital

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UCO Bank has reported Q2FY2011 below market estimates. It
posted PAT of Rs 119 Cr down 42.6% YoY basis due to higher
provisioning which went up by 310% during the quarter as the
bank was struggling with higher gross NPAs. On QoQ basis PAT was
down 54.2%. However taking into consideration bank's three
pronged strategy we believe that worst is over for the bank and
we expect a better quarterly result hereafter. During the analyst
meet, Management of the bank indicated three pronged strategy
ie improvement of CASA, improvement in Quality of asset and
better HR policies targeted at cost reduction.

UCO Bank- 2QFY2011 Result Update: Angel Broking

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Uco Bank announced its 2QFY2011 results today, registering a 54.2% qoq and
42.6% yoy decline in net profit to `119cr, below our estimates of `165cr due to
provisioning expenses of `580cr against estimates of ~`450cr. However, the
bank’s performance on parameters of NII and non-interest income was better
than our expectations. We maintain a Neutral recommendation on the stock.