UCO Bank to focus on improving NIM, cost to income ratio

UCO Bank is working on a three-pronged strategy to improve its net interest margin, the CASA (current account and savings bank account) ratio and the cost to income ratio. The bank is looking to bring down costs by outsourcing some of its “non-core operations”. It is also ramping up its digital initiatives and sensitising branches to improve the CASA ratio.

The bank’s share of CASA to total deposits stands at close to 38 per cent, which is low compared to the general banking average, which is close to 45-46 per cent.

“We are acutely conscious of the fact that our CASA is much lower compared to the other banks, and we are also aware that lower CASA also has an impact on the cost of funds. We are working towards improving the CASA. Digitally, I should say that now, since a lot of things have gone digital, we are also trying to develop digital solutions, especially to the merchants, for the purpose of growing our CASA,” Soma Sankara Prasad, MD & CEO, UCO Bank said in an earnings conference call transcript.

The bank’s net interest margin (NIM) is currently below 3 per cent at around 2.99 per cent. This is when some of the public sector banks have a NIM of around 3.3 – 3.4 per cent and some of the private sector banks have above 4 per cent. So low NIM is one area which the bank is “very conscious”, he said.

On the cost to income ratio, he said, while it is high for most of the public sector banks, UCO Bank’s cost to income ratio is much higher than other PSBs. There are several reasons for higher cost to income ratio including employee cost and certain other costs.