Central Bank Of India – Avoid
DSIJ Intelligence / 10 May 2012
| Particulars (Rs / Cr) | Mar-12 | Mar-11 |
|---|---|---|
| Net Profit (Rs / Cr) | -105.23 | 132.7 |
| CASA (%) | 33.27 | 35.17 |
| NIM (%) | 2.59 | 1.81 |
| CAR (%) | 12.4 | 11.64 |
| Provisions (Rs / Cr) | 858.89 | 306.02 |
| Gross NPA (%) | 4.83 | 1.82 |
| Net NPA (%) | 3.09 | 0.65 |
| Return on Assets (%) | 0.28 | |
| PCR (%) | 40.62 | 67.64 |
For the March quarter of 2012 the total Income of the bank increased by 13 per cent to Rs 5,372 crore but it posted a loss of Rs 105 crore against a profit of Rs 133 crore. This was on account of higher provisions and rise in NPA of which a major share was from the state electricity board. The bank also posted muted business growth for the year. As on March 31, 2012, the deposits increased by 9.38 per cent to Rs 1,96,173 crore while the advances grew at a rate of 14.7 per cent to Rs 1,50,725 crore. These were below the RBI’s projection of deposits and advances growth of 15.5 and 16 per cent respectively for FY12. The CASA ratio, considered as low-cost deposit, reduced by 190 basis points to 32.7 per cent.
Asset quality deterioration is the major headwind faced by most of the banking players. But the numbers which the CBI posted were the worst from among most of the other banks. As on March 31, 2012 the gross NPA of the bank increased by 301 basis points to 4.83 per cent while the net NPA increased by 244 basis points to 3.09 per cent on a YoY basis. The bank not only witnessed pressure on a yearly basis but the asset quality worsened even on a sequential basis. CBI’s NPA could be considered being right at the bottom of the heap.
The net interest margin (NIM) of the bank increased, which was the only positive factor for the bank. For the March quarter its NIM increased by 78 basis points to 2.59 per cent on a YoY basis and remained stable on a sequential basis. The treasury segment of the bank performed well. The revenue from the segment increased by 68 per cent to Rs 2,767 crore while profit increased by 152 per cent to Rs 2,207 crore. The retail and the wholesale banking segment extended their losses.
| Particulars (Rs / Cr) | FY12 | FY11 | % Change |
|---|---|---|---|
| Interest Earned | 19,149.5 | 15,220.67 | 25.81 |
| Other Income | 1,395.3 | 1,265.04 | 10.30 |
| Total Income | 20,544.8 | 16,485.71 | 24.62 |
| Interest Expended | 13,980.86 | 9,895.23 | 41.29 |
| Operating Expense | 3,748.99 | 3,998.99 | -6.25 |
| Total Expenditure | 17,729.88 | 13,894.22 | 27.61 |
| Operating Profit | 2,814.95 | 2,591.39 | 8.63 |
| Provisions | 2,168.61 | 932.22 | 132.63 |
| PBT | 758.72 | 1,659.17 | -54.27 |
| Tax | 225.68 | 406.76 | -44.52 |
| PAT | 533.04 | 1,252.41 | -57.44 |
Now let us look at at the bank’s full year financial performance. The net interest income decreased by 3 per cent to Rs 5,169 crore. Further, it increased the provisioning which stood at Rs 2,168 crore as against Rs 932 crore in a similar period last year. This impacted the net profit of the bank which decreased by 57 per cent to Rs 533 crore.
Overall we believe that the bank is facing serious headwinds on their asset quality front and is showing muted business growth. As per media reports, the management has guided that the bank is targeting to bring down its gross NPA to 3.5 per cent and expects 20 per cent credit and 25 per cent deposit growth for FY13. Even though CBI is available at a price to book value of around 0.63 times, we believe the bank will continue facing headwinds in the next couple of quarters and hence will remain under pressure. Therefore, it would be best to avoid the counter.
|
| Revenue | Profit | ||||
|---|---|---|---|---|---|---|
| Segment (Rs / Cr) | Mar-12 | Mar-11 | % Change | Mar-12 | Mar-11 | % Change |
| Treasury Operations | 2,767.17 | 1,640.47 | 68.68 | 2,207.94 | 875.15 | 152.29 |
| Retail Banking | 544.22 | 930.64 | -41.52 | -520.43 | -294.28 | 76.85 |
| Wholesale Banking | 2,018.05 | 2,029.92 | -0.58 | -1,117.11 | -403.95 | 176.55 |
| Unallocable | 42.33 | 154.19 |
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| Total | 5,371.77 | 4,755.22 | 12.97 | 570.4 | 176.92 | 222.41 |
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