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Research
Central Bank of India - 2QFY2013 Result Update - Angel Broking
Posted On : 2012-11-15 22:08:30( TIMEZONE : IST )
For 2QFY2013, Central Bank reported a decent set of numbers. The net profit was up by 35.1% yoy on a low base. Slippages were high but were on expected lines.
Advances growth healthy; Asset quality pressures continue: Advances grew by 17% yoy, while growth in deposits remained weak at 8% yoy. The growth in savings account deposits was reasonably healthy at 14.4% yoy, however current account deposits declined by 13.0% on a yoy basis. Reported NIM for the bank improved marginally by 4bp qoq, on account of lower cost of deposits during the quarter (down 8bp qoq). Growth in the bank's fee income was muted at 0.9% yoy, despite strong performance on the CEB front (up 43.1% yoy). Treasury income for the quarter increased by 55.6% yoy while recoveries from written-off accounts increased by 42.0% yoy. On the asset quality front, the bank continued to face pressure, with the gross NPA ratio increasing to 5.5% (4.9% in 1QFY2013) and net NPA ratio increasing to 3.8% (3.2% in 1QFY2013). The annualized slippage ratio for 2QFY2013 stood at 4.8% compared to 3.9% in 1QFY2013 and 3.8% in 2QFY2012. The bank restructured loans worth Rs.1,049cr during the quarter taking its outstanding restructured book to Rs.21,119cr (14.1% of advances, highest in the industry). Out of the Rs.8,507cr of gross NPAs, ~Rs.5,400 are from accounts worth above Rs.1cr (220 accounts). As per the management, there is strong focus of the bank in recovering these accounts.
Outlook and valuation: At the CMP, the stock is trading at 0.6x FY2014E ABV compared to its trading range of 0.6–1.7x with a median of 1.2x since its listing in 2007. However, we believe this is outweighed by the substantial concerns on its asset quality and capital adequacy. While the stock has corrected substantially over the past year, it is still trading higher than some of the other mid-size PSU banks with a better asset quality outlook and return ratios. Hence, we recommend a Neutral rating on the stock.
