UCO Bank Valuation Shifts to Very Attractive Amid Mixed Market Performance

Valuation Metrics: A Closer Look

As of early February 2026, UCO Bank’s P/E ratio stands at 13.53, a figure that positions it favourably within the public sector banking space. This valuation is notably lower than many private sector counterparts, yet slightly elevated compared to some peers such as Bank of India and Canara Bank, which trade at P/E ratios of 6.83 and 6.74 respectively. The bank’s P/BV ratio of 1.07 further underscores its current valuation appeal, indicating that the stock is priced just above its book value, a level often considered reasonable for public sector banks given their asset quality and capital adequacy profiles.

Comparatively, UCO Bank’s PEG ratio of 1.75 suggests a moderate premium relative to its earnings growth prospects. While this is higher than several peers—Canara Bank’s PEG is 0.27 and Bank of Maharashtra’s is 0.30—it reflects the market’s anticipation of steady, if unspectacular, earnings growth. Dividend yield remains modest at 1.06%, consistent with the bank’s cautious capital allocation strategy amid ongoing balance sheet repair efforts.

Historical Context and Peer Comparison

Historically, UCO Bank’s valuation has oscillated in response to its financial performance and broader sector dynamics. The recent upgrade in valuation grade from “attractive” to “very attractive” by MarketsMOJO reflects a recalibration of investor sentiment, driven by improved asset quality metrics and a stabilising return on equity (ROE) of 7.89%. This ROE, while below private sector benchmarks, represents a meaningful improvement over prior years and signals enhanced operational efficiency.

Return on assets (ROA) at 0.69% remains modest but stable, aligning with sector norms for public sector banks. The net non-performing assets (NPA) to book value ratio of 2.57% indicates ongoing challenges in credit quality, though this is an improvement relative to previous periods when NPAs weighed more heavily on the balance sheet.

When benchmarked against the Sensex, UCO Bank’s stock performance has been mixed. Over the past year, the stock has declined by 34.10%, significantly underperforming the Sensex’s 5.37% gain. However, over a five-year horizon, UCO Bank has delivered a robust 116.31% return, nearly doubling the Sensex’s 64.00% appreciation. This long-term outperformance highlights the cyclical nature of banking stocks and the potential for value realisation as fundamentals improve.

Market Capitalisation and Mojo Score Insights

UCO Bank’s market capitalisation grade remains low at 2, reflecting its mid-cap status within the public sector banking universe. The bank’s Mojo Score has improved to 53.0, earning a “Hold” grade, upgraded from a previous “Sell” rating on 16 September 2025. This upgrade signals a cautious optimism among analysts, recognising the bank’s improving fundamentals while acknowledging persistent risks.

Day-to-day price movements have been subdued, with the stock closing at ₹28.25 on 3 February 2026, down 1.05% from the previous close of ₹28.55. The 52-week trading range of ₹26.83 to ₹44.22 illustrates significant volatility, with the current price nearer to the lower end, reinforcing the narrative of valuation attractiveness from a contrarian perspective.

Sectoral Dynamics and Risk Considerations

The public sector banking sector continues to grapple with asset quality pressures and regulatory challenges. While UCO Bank’s net NPA to book value ratio of 2.57% is an improvement, it remains elevated relative to private sector peers. This necessitates ongoing vigilance from investors, particularly given the bank’s modest ROA and dividend yield.

Comparative valuations within the sector reveal that several public sector banks, including IDBI Bank, Bank of India, and Central Bank, also trade at very attractive levels, with P/E ratios ranging from 6.83 to 11.14 and P/BV ratios similarly close to or below 1.0. This cluster of valuation metrics suggests a broader sectoral undervaluation, potentially driven by macroeconomic uncertainties and investor caution.

Investment Implications and Outlook

For investors, UCO Bank’s improved valuation parameters offer a compelling entry point, particularly for those seeking exposure to public sector banks with turnaround potential. The upgrade in Mojo Grade to “Hold” reflects a balanced view, recognising both the bank’s progress and the challenges ahead.

However, the elevated PEG ratio relative to peers indicates that the market is pricing in moderate growth expectations, which may limit upside in the near term. Investors should weigh these factors alongside sectoral trends and macroeconomic developments, including interest rate movements and credit demand.

Conclusion: Valuation Recalibration Offers Cautious Optimism

UCO Bank’s shift to a “very attractive” valuation grade marks a notable development in its investment narrative. The bank’s P/E and P/BV ratios, combined with improving asset quality and a stabilising ROE, provide a foundation for renewed investor interest. Nevertheless, the stock’s recent underperformance relative to the Sensex and ongoing sectoral headwinds counsel prudence.

Investors should consider UCO Bank as part of a diversified portfolio approach to public sector banks, balancing valuation appeal against fundamental risks. The current market environment rewards selective exposure to banks demonstrating tangible progress in credit quality and earnings stability, attributes that UCO Bank is gradually reinforcing.

Overall, the recalibrated valuation metrics suggest that UCO Bank is increasingly priced for recovery, offering a potentially rewarding opportunity for investors with a medium to long-term horizon and a tolerance for sector-specific volatility.

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