Central Bank of India (Q4 FY12)

India Infoline News Service | Mumbai |

With CASA (6.9% qoq) growing ahead of the total deposits, its ratio improved by 80bps from 32.5% in Q3 FY12 to 33.3% in Q4 FY12.

  • CBOI’s sequential loan growth perked up by 13.1%, quite close to our expectation of 14%. The robust growth was broad-based with Agricultural lending (21.3% qoq) reporting the highest growth, followed by Corporate (13.1% qoq), Retail (11.4% qoq) and MSME (9.8% qoq). Retail being the key focus area witnessed 39.7% yoy growth. Within Retail, the main growth driver was Mortgage (107.8% yoy). Also Gold loans have gained importance over past few quarters, reporting 143.5% yoy growth on a small base. Going forward, bank will maintain its focus on Retail lending. Deposit growth of 4.2% qoq was disappointing, as we were expecting 12% sequential growth. With CASA (6.9% qoq) growing ahead of the total deposits, its ratio improved by 80bps from 32.5% in Q3 FY12 to 33.3% in Q4 FY12. CASA is likely to improve further with several initiatives in place (branch additions, employment of proficient staff, separate vertical to focus on resource mobilization etc). Growth in high-cost bulk deposits by 10.1% qoq was daunting. However, this concern was partially offset by the bank’s efforts to run down the CDs by 15.5% qoq. Overall, the deposit profile continues to be weak with ‘High-cost Bulk Deposits+CDs’ accounting for 31.8% of the total deposits. Management has guided to grow it loan book and deposits by 20% and 25%, respectively.
  • NIM improved by 6bps, versus our expectation of 20bps fall. The favourable impact of 6ppt increase in C/D ratio (from 71% in Q3FY12 to 77% in Q4FY12) was offset by 3bps fall in Yield on Advances (owing to interest reversal on account of higher restructuring and slippages) and 4bps rise in Cost of Deposits. With perturbing asset quality and feeble deposit franchise we expect margin to remain under pressure in the near term. However increasing focus on high-yielding Retail lending and thrust on CASA mobilization, may revive NIM by the end of FY13. Management expects NIM to be around 3% during H2 FY13.
  • Asset quality deteriorated significantly owing to the slippages arising from shifting accounts (with the ticket size of less than Rs0.5mn) to 100% CBS, higher restructuring and several big corporate accounts turning NPAs. Gross NPA ratio shot up by 115bps to 4.8% in Q4 FY12 from 3.7% in Q3 FY12. Fresh additions during Q4 FY12 stood at Rs35.4bn compared to Rs14.6bn in the previous quarter, thereby increasing the delinquency ratio from 4.4% in Q3 FY12 to 10% in Q4 FY12. As on Dec’2012, the outstanding restructured advances stood at Rs173.5bn (11.5% of total advances) highest in the industry. During the quarter, bank restructured accounts worth Rs77.8bn. 50% of the total assets restructured during FY12 were attributable to Power Discoms, followed by Aviation (14%) and Telecommunications (11.6%).
  • Higher slippages and restructuring led to a spike in credit cost to 2.5% in Q4FY12 from 1.3% in Q3FY12. Provisions on restructured advances were ~Rs3bn during the quarter. Higher provisioning requirement sternly dragged down the profitability. Also the PCR slid from 48.1% to 40.6% qoq. Going ahead, profitability will remain weak in order to increase provisioning to bring it back to its normalized level of 65-70%.
  • Other income witnessed a healthy growth of 14.6% sequentially, driven by 61.5% growth in CEB, 38.2% growth in recovery of written-off accounts and 34.2% growth in trading profits. Bank has planned several initiatives to further boost its non-interest income. Cost/Income ratio rose by 4ppt to 64% in Q4FY12 owing to incremental branch additions.
  • Overall the performance of the bank was very weak and is expected to remain under pressure in the near term. With sharp deceleration in asset quality, weak RoA, higher provisioning requirement and elevated C/I ratio revival in the bank’s fortune in the near term seems to be far-fetched. Thereby we maintain our SELL rating and reduce the target price to Rs66
Results table
(Rs mn)
Q4 FY12
Q3 FY12
% qoq
Q4 FY11
% yoy
Total Interest Income
49,401
47,415
4.2
42,323
16.7
Interest expended
(36,765)
(35,629)
3.2
(28,038)
31.1
Net Interest Income
12,636
11,786
7.2
14,285
(11.5)
Other income
4,316
3,574
20.8
5,229
(17.5)
Total Income
16,952
15,359
10.4
19,515
(13.1)
Operating expenses
(10,825)
(9,221)
17.4
(16,203)
(33.2)
Provisions
(8,587)
(4,864)
76.6
(3,060)
180.6
PBT
(2,459)
1,275
(292.9)
251
(1,080.1)
Tax
1,407
(1,266)
(211.1)
1,076
30.7
Adjusted PAT
(1,052)
9
(12,334.9)
1,327
(179.3)
Exceptionals
-
1,124
 
-
 
Reported PAT
(1,052)
1,132
(192.9)
1,327
(179.3)
EPS
(5.7)
7.0
(181.6)
13.1
(143.5)
 
Key  Ratios
Q4 FY12
Q3 FY12
chg qoq
Q4 FY11
chg yoy
NIM (%)
2.6
2.5
0.1
3.5
(0.9)
Yield on advances (%)
11.1
11.2
(0.0)
10.6
0.5
Yield on investments (%)
7.8
7.3
0.6
7.9
(0.1)
Cost of Deposits (%)
7.4
7.3
0.0
6.1
1.3
CASA (%)
33.3
32.5
0.8
35.2
(1.9)
C/D (x)
0.77
0.71
0.06
0.73
0.04
Non-interest income (%)
25.5
23.3
2.2
26.8
(1.3)
Non-interest income/Interest exp (%)
11.7
10.0
1.7
18.7
(6.9)
Cost to Income (%)
63.9
60.0
3.8
83.0
(19.2)
Provisions/Income (%)
16.0
9.5
6.4
6.4
9.5
RoA (%)
(0.2)
0.2
(0.4)
0.3
(0.5)
CAR (%)
12.4
13.0
(0.6)
11.7
0.7
Gross NPA (%)
4.8
3.7
1.2
1.8
3.0
Source: Company, India Infoline Research
Financial Summary
Y/e 31 Mar (Rs m)
FY11
FY12
FY13E
FY14E
Total operating income
65,904
65,640
75,361
86,628
BSE 41.00 [0.20] ([0.49]%)
NSE 41.15 [0.15] ([0.36]%)

***Note: This is a NSE Chart

 

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