UCO Bank

Dear Shareholders,

I have great pleasure in releasing the Annual Report of UCO Bank for the financial year ended March 31, 2024. Details of the achievements and initiatives taken by the Bank during this period are provided in the enclosed Annual Report for this period. UCO Bank has made progress in several key areas and has successfully implemented new initiatives for the benefit of customers, while at the same time taking care of stakeholders' interests.

Outlook for global growth for 2025 remains steady at 3.2 percent, which is the same as in 2024. The growth is low by historical standards, owing to both near-term challenges, such as high borrowing costs and withdrawal of fiscal support, and longer-term effects from the COVID-19 pandemic and growing geopolitical tensions. Almost all nations felt the effects of global economic uncertainty, including higher energy and food prices and volatile markets. Inflation, however, is falling faster than expected in most regions, amid unwinding supply- side issues and restrictive monetary policy. Global headline inflation is expected to fall to an annual average of 4.5 percent in 2025 from the present estimate of 5.9 percent of 2024.

On the domestic front, India is estimated to grow at 7.6% in FY 2024, an increase from 7.3% in FY 2023. This reaffirms India's position as the fastest-growing major economy globally. However, Gross Domestic Product (GDP) projection for FY2025 is 7.0%. Despite the declining forecast (National Statistical Office estimates), outlook for the current fiscal is encouraging. With declining inflation and softening of global commodity prices, import cost will reduce substantially. With exports turning positive, coupled with import-substitution measures and higher capital inflows, managing the current account deficit may be less problematic in the current year. Trends in industrial growth are also encouraging. Against this backdrop of a challenging macro-economic environment, the domestic banking system continued to enjoy the confidence of the banking public. This is reflected in the aggregate deposits of All Scheduled Commercial Banks (ASCB) growing higher at 13.5% in FY2024 against 9.6% in FY2023. There was also acceleration in credit growth to 20.2% in FY2024 from 15.0% in FY2023.

The Indian banking industry has been on an upward trajectory aided by strong economic growth, rising disposable incomes, increasing consumerism and easier access to credit. Digital modes of payments have grown by leaps and bounds over the last few years and technological innovations have led to marked improvements in efficiency, productivity, quality, inclusion and competitiveness in the extension of financial services, especially in the area of digital lending.

The financial performance of the Bank during the financial year ended 31st March, 2024, remained satisfactory. I am happy to announce that for the financial year ending March 2024, the Board of Directors of the Bank has recommended an equity dividend of 2.8% amounting to Rs 0.28 per share.

Profit: The Operating Profit of the Bank for FY2023-24 stood at Rs. 4576 crores as compared to Rs. 4341 crores in FY2022- 23 registering a growth of 5.43%. The Bank has posted a Net Profit of Rs. 1654 crores for FY2023-24 as compared to Rs. 1862 crores in FY2022-23 registering a decline of 11.20%, which was on account of higher provisions. While Net Interest Income recorded a growth of 10.32%, the Non-Interest Income increased by 30.18%, Operating Expenses increased by 23.21% which was attributable mainly, inter alia, to higher staff costs.

Net Interest Income: The Net Interest Income of the Bank registered a growth of 10.32% from Rs. 7343 crores in FY2022-23 to Rs. 8101 crores in FY2023-24. This was due to higher growth in the advances portfolio. Interest income from advances correspondingly rose from Rs. 10343 crores to Rs. 14162 crores during the year registering a growth of 36.92%. Interest Income from Investments has declined by 1.60% in FY2023-24. Total interest expenses increased from Rs. 10307 crores in FY2022-23 to Rs. 13754 crores in FY2023-24. The average cost of deposits has consequently increased from 4.06% in FY2022-23 to 4.78% in FY2023-24.

Non-Interest Income: Non-interest income stood at Rs. 3266 crores in FY2023-24 as against Rs. 2508 crores in FY2022- 23 registering an increase of 30.18%.

Operating Expenses: There was an increase of 26.18% in Staff Expense, which includes both Salary and Employee Benefits, from Rs. 3873 crores in FY2022-23 to Rs. 4887 crores in FY2023-24. Other Operating Expenses registered an increase of 16.19% mainly due to increase in expenses on rent, taxes and lighting, printing and stationery and miscellaneous expenditure. Operating Expenses, comprising both staff cost and other operating expenses, have registered an increase of 23.21% over the previous year.

Provisions and Contingencies: Total provisions made in FY2023-24 were Rs. 2922 crores as against Rs. 2478 crores in FY2022-23, registering an increase of 17.92%. Major amounts of provisions made in FY2023-24 were as under:

• Rs. 1068 crores towards Non-Performing Assets (as against Rs. 1296 crores in FY2022-23).

• Rs. 734 crores towards NPI and others (as against Rs. 81 crores in FY2022-23).

• Rs. 205 crores for Standard Assets (as against Rs. 59 crores in FY2022-23).

• Rs. 915 crores towards Income Tax (including DTA) (as against Rs. 1043 crores in FY2022-23).

Reserves and Surplus: Total Reserves and Surplus as on

31.03.2024 was Rs. 15401 crores as against Rs. 13809 crores as on 31.03.2023. An amount of Rs. 413.44 crores was transferred to Statutory Reserves and Rs. 10.38 crores to Capital Reserves.

Assets: The total assets of the Bank increased by 7.59% from Rs. 300863 crores at the end of March 2023 to Rs. 323692 crores at the end of March 2024. Gross Investments decreased by 2.38% from Rs. 97669 crores to Rs. 95265 crores as at the end of March 2024. During the period, Global Advances increased by 15.62% from Rs. 161629 crores to Rs. 186877 crores.

Liabilities: The Bank's aggregate liabilities (excluding capital and reserves) rose by 7.72% from Rs. 275098 crores on 31st March 2023 to Rs. 296335 crores on 31st March 2024. The increase in liabilities was mainly contributed by increase in deposits. Global Deposits stood at Rs. 263130 crores as on 31st March 2024 against Rs. 249338 crores as on 31st March 2023.

UCO Bank has been taking a number of initiatives for improvement in various functional and operational areas to enhance its competitive strength. We are continuously upgrading our cyber security measures and bolstering our Information Technology and Digital Banking channels. We are financing various critical sectors like Retail, Agriculture and Micro, Small & Medium Enterprises, by creating tailor-made products for these segments. We seek to create a positive impact on society through such financing. As we move forward on our growth trajectory, we remain committed to create sustainable value for all our stakeholders, maintaining governance standards, including compliance with all legal and regulatory requirements.

We are grateful to our customers, who continue to rely on and bank with us. Their trust motivates us to serve them better and we shall continue to work towards fulfilling their expectations and aspirations in the years ahead. I further wish to express my gratitude to our shareholders for their trust in our capabilities and their unwavering support for all our efforts.

I would also like to place on record my appreciation for the inputs and contributions made by my fellow-Directors (both past and present) on the Board. I also commend the leadership of the Bank for implementing the strategies and directions of the Board with commitment and enthusiasm. I further wish to compliment our employees for their devotion and sustained efforts in improving the efficiency and image of the Bank. I would also like to take this opportunity to thank Reserve Bank of India and the Government of India for their unwavering support and guidance.