UCO Bank shares may rally up to 40% after PCA exit

Mumbai: Shares of UCO Bank surged nearly 11% to close at ₹14.18 on Thursday after the Reserve Bank of India lifted prompt corrective action restrictions on the lender. Analysts said if the momentum continues, the stock could move up by as much as 40%.

The central bank said UCO Bank has given a written commitment that it would comply with minimum regulatory capital, net non-performing assets and leverage ratio on an ongoing basis. The lender was on the prompt corrective action list since May 2017. It was barred from increasing risk-weighted assets due to high non-performing asset (NPA) ratios and a negative return on assets.

“It has been falling for the last seven years and has gained 11-12% this year. It can go to ₹20 if there is a positive trigger,” said Chandan Taparia, derivative analyst at Motilal Oswal. The stock has shed over 84% since September 2014.

The Kolkata-based lender had reported a nearly four-fold jump in net profit in the June quarter at ₹10.18 crore compared to ₹2.15 crore profit in the same period a year ago. Its total income gained 2.3% to ₹453.91 crore.

“Those looking for a short-term bounce can buy, but they should not hold it for a long term. If it falls below 12.5, one should avoid the stock,” said Taparia.