Central Bank of India - 4QFY2013 Result Update - Angel Broking

Central Bank reported healthy set of numbers for the quarter, as it posted Net profit of Rs. 169cr as against a loss of Rs. 105cr in 4QFY2012 (the bank had completely switched-over to system based NPA recognition during that quarter, resulting in substantially higher provisioning). Key takeaways from the result were healthy NII growth (21.4% yoy, in-line with expectations), strong performance on the non-interest income front (growth of 47.4% yoy) and sequential improvement in the asset quality front (after witnessing continued stress for several quarters, Gross and Net NPA levels, on an absolute basis came in lower by 5.4% and 14.9% qoq).

Healthy business growth; Asset quality improves sequentially: During 4QFY2013, the bank's advances grew by a healthy 16.6% yoy. Growth in deposits was also healthy at 15.2% yoy, even as the bank reduced high cost bulk deposits (share of bulk deposits inc. CDs to overall deposits at 24.4% in 4QFY2013 compared to 31.8% in 4QFY2012). CASA ratio for the bank improved by 51bp qoq to 32.6%. Reported NIMs for the bank improved marginally by 4bp qoq to 2.7%. Growth in the bank's non-interest income (excluding treasury) was strong at 47.6% yoy, aided by higher recoveries which almost tripled on a yoy basis and income from ‘others' segment which more than doubled on a yoy basis. After witnessing continued stress for past several quarters, the bank witnessed improvement in the asset quality, as gross and net NPA levels for the bank reduced sequentially by 5.4% and 14.9%, respectively. Annualized slippages ratio for the quarter came in at 1.9%, much lower than 3.3% in 3QFY2013 and 4.8% in 2QFY2013. PCR improved drastically by 655bp qoq, however, still remains moderate at 47.8%. The bank restructured loans worth Rs. 1,226cr, during the quarter taking its outstanding restructured book to Rs. 22,681cr (13.2% of net advances).

Outlook and valuation: At the CMP, the stock is trading at 0.6x FY2015E ABV compared to its trading range of 0.6–1.7x with a median of 1.2x since its listing in 2007. At CMP, the stock still trades at relatively expensive valuation than some of the other mid-size PSU banks with a better asset quality outlook and return ratios. Hence, we maintain our Neutral rating on it.

Source : Equity Bulls

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