Central Bank of India Result Updated

7/31/2019 Central Bank of India Result Updated

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Please refer to important disclosures at the end of this report 1

Particulars (` cr) 4QFY12 3QFY12 % chg (qoq) 4QFY11 % chg (yoy)NII 1,264 1,179 7.2 1,429 (11.5)Pre-prov. profit 613 614 (0.2) 331 85.1

PAT (105) 113 (192.9) 133 (179.3)Source: Company, Angel Research

Central Bank of India reported a dismal performance for 4QFY2012,directionally in-line with our expectation, with net loss of `105cr for thequarter as against profit of `133cr in 4QFY2011. The banks disappointingperformance was a result of muted performance on the operating front andconsiderably higher provisioning expenses on the back of continued

deterioration in asset quality, evident from elevated slippages and ballooningrestructuring. We recommend Neutral on the stock.Business growth remains moderate; Asset quality deteriorates considerably: Thebanks business growth was moderate during 4QFY2012, with advances growing

by 13.7% yoy on the back of healthy growth witnessed in retail, MSME and direct

agri segments. Deposits growth was also moderate at 9.4% yoy. A sharp decline

in volatile current deposits by 17.8% yoy, despite better 10.4% yoy growth in

saving deposits, resulted in an 189bp yoy fall in CASA ratio to 33.3% (up by 82bp

qoq). Reported NIM for the bank remained flat on a qoq basis, on the back of a

32bp qoq fall in yield on advances to 11.1% and a 26bp rise in cost of deposits

to 7.4%. Asset quality deteriorated considerably during 4QFY2012, with gross

NPA ratio rising to 4.8% (3.7% in 3QFY2012) and net NPA ratio climbing to 3.1%

(2.0% in 3QFY2012). Slippages for 4QFY2012 stood at steep `3,543cr(annualized slippage ratio of 10.9%), more than five times the average quarterly

run-rate of `651cr over the past eight quarters. Management attributed 50% of

the slippages to the last phase of switchover to system-driven NPA recognition,

which was completed in 4QFY2012 after a late beginning post 1QFY2012. The

bank also restructured loans amounting to over `7,467cr during 4QFY2012,

largely pertaining to SEBs and the aviation and telecom sectors and took its

outstanding restructured book to `17,347cr (an absolute increase of 75.6% qoq).

Provision coverage ratio (including technical write-offs) declined by 743bp qoq

and remains one of the lowest in industry at 40.6%.

Outlook and valuation: At the CMP, the stock is trading at 0.7x FY2014E ABVcompared to its trading range of 0.61.7x 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. 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.Key financialsY/E March (` cr) FY2011 FY2012 FY2013E FY2014ENII 5,325 5,169 5,521 6,462% chg 109.2 (2.9) 6.8 17.1

Net profit 1,121 373 1,014 1,494% chg 18.3 (57.4) 120.3 40.6

NIM (%) 2.8 2.5 2.3 2.4

EPS (`) 27.7 5.1 13.8 20.3P/E (x) 2.8 15.3 5.6 3.8

P/ABV (x) 0.6 0.9 0.8 0.7

RoA (%) 0.6 0.2 0.4 0.5

RoE (%) 23.2 5.3 10.9 14.4

Source: Company, Angel Research

NEUTRALCMP `78

Target Price -

Investment Period -

Stock Info

Sector Banking

Market Cap (` cr) 5,723

Beta 1.1

52 Week High / Low 133/63

Avg. Daily Volume 176,176

Face Value (`) 10

BSE Sensex 16,293

Nifty 4,929

Reuters Code CBI.BO

Bloomberg Code CBOI@IN

Shareholding Pattern (%)

Promoters 79.2

MF / Banks / Indian Fls 10.9

FII / NRIs / OCBs 2.6

Indian Public / Others 7.3

Abs. (%) 3m 1yr 3yr

Sensex (8.2) (12.3) 39.5

Central BoI (22.9) (39.2) 89.8

Vaibhav Agrawal022 3935 7800 Ext: 6808

[email protected]

Varun Varma022 3935 7800 Ext: 6847

[email protected]

Sourabh Taparia022 3935 7800 Ext: 6872

[email protected]

Central Bank of IndiaPerformance Highlights

4QFY2012 Result Update | Banking

May 11, 2012


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Central Bank of India | 4QFY2012 Result Update

May 11, 2012 2

Exhibit 1:4QFY2012 performanceParticulars (` cr) 4QFY12 3QFY12 % chg (qoq) 4QFY11 % chg (yoy)Interest earned 4,940 4,741 4.2 4,232 16.7- on Advances / Bills 3,732 3,547 5.2 3,122 19.6- on investments 1,130 1,120 0.9 971 16.3

- on balance with RBI & others (291) 75 (489.0) 8 (3,540.5)

- on others 370 - NA 131 183.0

Interest Expended 3,677 3,563 3.2 2,804 31.1Net Interest Income 1,264 1,179 7.2 1,429 (11.5)Other income 432 357 20.8 523 (17.5)Other income excl. treasury 334 284 17.3 357 (6.5)

- Fee Income 230 148 55.4 181 27.1

- Treasury Income 98 73 34.2 166 (41.0)

- Recov. from written off a/cs 47 34 38.2 75 (37.3)

- Others 57 102 (44.7) 101 (43.9)

Operating income 1,695 1,536 10.4 1,951 (13.1)Operating expenses 1,082 922 17.4 1,620 (33.2)- Employee expenses 631 641 (1.5) 1,320 (52.2)

- Other Opex 451 281 60.5 300 50.3

Pre-provision Profit 613 614 (0.2) 331 85.1Provisions & Contingencies 859 486 76.6 306 180.6- Provisions for NPAs 879 428 105.4 196 349.3

- Provisions for Investments (80) 52 (253.8) 41 (293.9)

- Other Provisions 60 6 838.5 69 (13.7)

PBT (246) 127 (292.9) 25 (1,080.2)Provision for Tax (141) 14 (1,087.3) (108) 30.7PAT (105) 113 (192.9) 133 (179.3)Effective Tax Rate (%) 57.2 11.2 4603bp (428.9) 48611bp


Exhibit 2:Actual vs. Angel estimatesParticulars (` cr) Actual Estimates Variation (%)NII 1,264 1,230 2.7

Non-Interest Income 432 393 9.9

Operating Income 1,695 1,623 4.4Operating Expenses 1,082 990 9.3

Pre-Prov. Profit 613 633 (3.2)Provisions & Cont. 859 477 80.2

PBT (246) 157 (257.0)Prov. for Taxes (141) 29 (581.8)

PAT (105) 127 (182.6)Source: Company, Angel Research


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May 11, 2012 3

Exhibit 3:4QFY2012 performance analysisParticulars 4QFY12 3QFY12 % chg (qoq) 4QFY11 % chg (yoy)Balance sheetAdvances (`cr) 147,513 133,317 10.6 129,725 13.7

Deposits (`cr) 196,173 188,226 4.2 179,356 9.4

Credit-to-Deposit Ratio (%) 75.2 70.8 437bp 72.3 287bp

Current deposits (`cr) 12,680 10,076 25.8 15,431 (17.8)

Saving deposits (`cr) 52,595 51,004 3.1 47,645 10.4

CASA deposits (` cr) 65,275 61,080 6.9 63,076 3.5

CASA ratio (%) 33.3 32.5 82bp 35.2 (189)bp

CAR (%) 12.4 12.9 (46)bp 11.7 72bp

Tier 1 CAR (%) 7.8 7.8 2bp 6.4 144bp

Profitability Ratios (%)Cost of deposits 7.4 7.1 26bp 6.1 129bp

Yield on advances 11.1 11.4 (32)bp 10.6 52bp

Yield on investments 7.8 7.2 65bp 7.9 (6)bpReported NIM 2.6 2.5 6bp 1.8 78bp

Cost-to-income ratio 63.9 60.0 382bp 83.0 (1918)bp

Asset qualityGross NPAs (` cr) 7,273 4,922 47.8 2,394 203.8

Gross NPAs (%) 4.8 3.7 114bp 1.8 301bp

Net NPAs (`cr) 4,557 2,669 70.7 847 437.8

Net NPAs (%) 3.1 2.0 105bp 0.7 244bp

Provision Coverage Ratio (%) 40.6 48.1 (743)bp 67.6 (2702)bp

Slippage ratio (%) 10.9 4.5 641bp 2.3 860bp

Credit cost (%) 1.6 0.8 79bp 0.4 118bp


Business growth remains moderate; NIM remains flat qoq

The banks business growth was moderate during 4QFY2012, with advances

growing by 13.7% yoy and deposits growing by 9.4% yoy. Growth in advances

was mainly driven by healthy growth witnessed in the retail, MSME and direct agri

segments, which grew by 39.7%, 22.9% and 20.6% yoy, respectively.

On the deposits side, volatile current account deposits declined sharply by 17.8%

yoy. Saving account deposits growth, though moderate, was better at 10.4% yoy.

Overall CASA deposit growth was rather muted at 3.5% yoy. Consequently, CASAratio fell sharply by 189bp yoy (increased by 82bp qoq) to 33.3%. The share of

high-cost bulk deposits and CDs declined by 105bp qoq and stood at 31.8% in

4QFY2012.

Reported NIM for the bank remained flat on a qoq basis, on the back of a 32bp

qoq fall in yield on advances to 11.1% and a 26bp rise in cost of deposits to 7.4%.

Yield on investment grew by 65bp qoq to 7.8%.


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May 11, 2012 4

Exhibit 4:Business growth remains moderate in 4QFY12


Exhibit 5:CASA deposits growth slowing down


Exhibit 6:Decline in yield on advances sequentially...


Exhibit 7:...coupled with rise in CoD, led to fall in NIM


Healthy growth in fee income, amidst declining recoveries and

fall in treasury income

Growth in the banks fee income was strong at 27.1% yoy at `230cr. Treasury

income for the quarter declined to `98cr vis--vis `166cr in 3QFY2012.

Recoveries from written-off accounts were sluggish, declining by 37.3% yoy to

`47cr. Overall, other income excl. treasury declined by 6.5% yoy to `334cr.

Asset quality deteriorates considerably in 4QFY2012

The banks asset quality deteriorated considerably during 4QFY2012, as we had

anticipated in our previous quarter result update, with gross NPA ratio rising to

4.8% (3.7% in 3QFY2012) and net NPA ratio climbing to 3.1% (2.0% in

3QFY2012). Slippages for 4QFY2012 stood at steep `3,543cr (annualized

slippage ratio of 10.9%) compared to `1,464cr of slippage and annualized

slippage ratio of 4.5% in 3QFY2012. Slippages for the quarter were more than

five times the average quarterly run-rate of `651cr over the past eight quarters.

A late starter in CBS implementation, the bank commenced the phased switchover

to NPA-based recognition system only post 1QFY2012, which was completed only

in 4QFY2012. Management attributed 50% of the slippages on account of the

switchover exercise. Management also sounded confident of achieving normalized

levels of NPAs in FY2013.

23.1

17.2

12.7

14.6

13.7

10.6

20.3

12.2

15.4

9.4

72.3

67.8 68.1

70.8

75.2

64.0

66.0

68.0

70.0

72.0

74.0

76.0

-

10.0

20.0

30.0

4QFY11 1QFY12 2QFY12 3QFY12 4QFY12

Adv. yoy chg (%) Dep. yoy chg (%) CDR (%, RHS)

35.2

32.6

32.8

32.5

33.3

13.014.7

6.9 7.3

3.5

(5.0)

-

5.0

10.0

15.0

20.025.0

30.0

15.0

20.0

25.0

30.0

35.0


CASA ratio (%) CASA yoy growth (%, RHS)

10.60

11.37

11.5911.44

11.12

10.00

10.50

11.00

11.50

12.00


(%)3.47

2.99 3.00

2.53 2.59

1.00

1.50

2.00

2.50

3.00

3.50


(%)


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May 11, 2012 5

Apart from the elevated level of slippages, the bank also restructured loans

amounting to over `7,467cr during 4QFY2012, taking its outstanding restructured

book to `17,347cr (an absolute increase of 75.6% qoq). Management indicated

that these accounts largely pertained to SEBs and the aviation and telecom sectors.Going ahead, management guided for no major advance to be in the

restructuring pipeline.

As a result of elevated slippages and sharply higher restructuring, the bank had to

accelerate the provisioning significantly, which resulted in provisioning expenses

rising steeply by almost 3.5 times on a yoy basis to `879cr. Despite this, provision

coverage ratio (including technical write-offs) declined by 743bp and remains one

of the lowest in the industry at 40.6%.

Exhibit 8:Slippages shoot up


Exhibit 9:Asset qualitydeteriorates considerably

Source: Company, Angel Research; Note: PCR including tech. write-offs

Investment concerns

Low branch productivity and structurally higher opex structure

The bank suffers from low branch and employee productivity in terms of business

per branch as well as business per employee. Business per branch for FY2012 was

lower than most peer banks. Due to this, the bank suffers from higher operating

expenses, as reflected in opex-to-average assets ratio of 2.0% in FY2012.

Outlook and valuation

At the CMP, the stock is trading at 0.7x FY2014E ABV compared to its trading

range of 0.61.7x with a median of 1.2x since its listing in 2007. However, we

believe this is outweighed by the substantial concerns on the asset quality. 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.

2.3

1.8

3.8

4.5

10.9

0.40.5

0.7 0.8

1.6

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

-

2.0

4.0

6.0

8.0

10.0

12.0


Slippages (%) Credit cost (%, RHS)

1.8

2.3

2.9

3.7

4.8

0.7

0.9

1.4

2.0

3.1

67.665.2

56.8

48.1

40.6

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

-

1.0

2.0

3.0

4.0

5.0


Gross NPAs (%) Net NPAs (%) PCR (%, RHS)


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May 11, 2012 6

Exhibit 10:Key assumptionsParticulars (%) Earlier estimates Revised estimatesFY2013 FY2014 FY2013 FY2014Credit growth 13.5 14.0 13.0 14.0Deposit growth 14.0 14.0 14.0 14.0

CASA ratio 34.0 33.7 32.4 32.1

NIMs 2.4 2.4 2.3 2.4

Other income growth 0.1 11.1 (5.6) 10.1

Growth in staff expenses 5.0 15.0 5.0 13.0

Growth in other expenses 5.0 15.0 5.0 13.0

Slippages 3.2 2.7 3.2 2.5

Source: Angel Research

Exhibit 11:Change in estimates

Particulars (` cr) FY2013FY2014

Earlierestimates Revisedestimates Var. (%) Earlierestimates Revisedestimates Var. (%)NII 5,502 5,521 0.3 6,425 6,462 0.6

Non-interest income 1,358 1,317 (3.0) 1,509 1,450 (3.9)

Operating income 6,860 6,838 (0.3) 7,934 7,912 (0.3)Operating expenses 3,839 3,936 2.5 4,415 4,448 0.7

Pre-prov. profit 3,021 2,902 (4.0) 3,519 3,464 (1.6)Provisions & cont. 1,346 1,164 (13.6) 1,103 1,020 (7.5)PBT 1,675 1,738 3.8 2,416 2,444 1.2

Prov. for taxes 544 564 3.8 784 793 1.2PAT 1,132 1,174 3.8 1,632 1,651 1.2Source: Angel Research


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May 11, 2012 7

Exhibit 12:P/ABV band


Exhibit 13:Recommendation summaryCompany Reco. CMP(`) Tgt. price(`) Upside(%) FY2014EP/ABV (x) FY2014ETgt. P/ABV (x) FY2014EP/E (x) FY2012-14EEPS CAGR (%) FY2014ERoA (%) FY2014ERoE (%)AxisBk Buy 1,001 1,587 58.5 1.4 2.2 7.2 16.4 1.5 20.3

FedBk Neutral 415 - - 1.0 - 7.3 13.0 1.3 14.5

HDFCBk Accumulate 511 567 10.9 2.9 3.3 14.4 27.0 1.7 22.1

ICICIBk* Buy 813 1,201 47.8 1.3 1.9 10.0 20.4 1.5 16.0

SIB Neutral 22 - - 1.0 - 5.8 4.5 0.8 17.5

YesBk Buy 329 470 42.6 1.7 2.4 7.9 22.5 1.4 23.3

AllBk Accumulate 148 166 12.3 0.6 0.7 3.5 6.2 0.9 17.6

AndhBk Neutral 105 - - 0.6 - 4.1 3.3 0.9 16.0

BOB Buy 649 925 42.6 0.7 1.1 4.3 11.1 1.1 18.2

BOI Buy 353 411 16.3 0.7 1.0 4.5 23.3 0.8 16.9

BOM Accumulate 48 55 14.4 0.6 0.7 3.7 45.3 0.7 17.2

CanBk Buy 419 522 24.6 0.7 0.9 4.5 11.8 0.9 16.4

CentBk Neutral 78 - - 0.7 - 3.8 100.1 0.5 14.4CorpBk Buy 405 504 24.4 0.5 0.7 3.6 5.3 0.8 16.5

DenaBk Buy 85 111 30.7 0.5 0.7 3.2 6.6 0.9 17.0

IDBI# Buy 92 117 27.0 0.6 0.7 3.8 22.7 0.9 14.8

IndBk Buy 180 218 21.6 0.6 0.8 3.7 5.4 1.2 18.2

IOB Buy 82 96 18.0 0.5 0.6 3.8 28.3 0.6 13.9

J&KBk Neutral 846 - - 0.7 - 4.3 8.8 1.4 18.6

OBC Buy 219 274 25.1 0.5 0.6 3.4 27.7 0.8 14.3

PNB Buy 746 1,066 43.0 0.7 1.1 4.3 10.3 1.0 18.1

SBI* Buy 1,852 2,511 35.6 1.2 1.6 6.9 23.6 1.0 19.1

SynBk Buy 91 131 43.9 0.5 0.7 3.0 17.3 0.8 17.1

UcoBk Neutral 68 - - 0.7 - 3.8 13.0 0.6 15.4

UnionBk Buy 206 276 34.3 0.7 0.9 4.1 24.8 0.8 17.5

UtdBk Buy 58 78 33.6 0.4 0.6 2.6 22.5 0.7 16.5VijBk Neutral 53 - - 0.6 - 4.3 13.5 0.5 13.7

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

0

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Price (`) 0.3x 0.6x 0.9x 1.2x 1.5x


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May 11, 2012 8

Income statement

Y/E March (` cr) FY09 FY10 FY11 FY12 FY13E FY14ENet Interest Income 2,228 2,545 5,325 5,169 5,521 6,462- YoY Growth (%) 0.2 14.2 109.2 (2.9) 6.8 17.1Other Income 1,070 1,735 1,265 1,395 1,317 1,450- YoY Growth (%) 18.6 62.2 (27.1) 10.3 (5.6) 10.1

Operating Income 3,298 4,281 6,590 6,564 6,838 7,912- YoY Growth (%) 5.5 29.8 54.0 (0.4) 4.2 15.7

Operating Expenses 1,862 2,222 3,999 3,749 3,936 4,448- YoY Growth (%) 6.6 19.4 80.0 (6.3) 5.0 13.0

Pre - Provision Profit 1,437 2,059 2,591 2,815 2,902 3,464- YoY Growth (%) 4.1 43.3 25.9 8.6 3.1 19.4

Prov. & Cont. 512 509 932 2,169 1,164 1,020- YoY Growth (%) (3.0) (0.5) 83.2 132.6 (46.3) (12.3)

Profit Before Tax 925 1,550 1,659 646 1,738 2,444- YoY Growth (%) 8.6 67.5 7.1 (61.0) 168.9 40.6

Prov. for Taxation 354 491 407 113 564 793- as a % of PBT 38.2 31.7 24.5 17.5 32.4 32.4

PAT 571 1,058 1,252 533 1,174 1,651- YoY Growth (%) 3.8 85.3 18.3 (57.4) 120.3 40.6

Preference Dividend 78 61 131 160 160 157PAT avl. to Eq. SH 494 998 1,121 373 1,014 1,494- YoY Growth (%) 5.0 102.1 12.4 (66.7) 171.7 47.3

Balance sheetY/E March (` cr) FY09 FY10 FY11 FY12 FY13E FY14EShare Capital 1,321 1,771 2,021 2,353 2,353 2,353

- Equity 404 404 404 736 736 736

- Preference 917 1,367 1,617 1,617 1,617 1,617

Reserve & Surplus 5,091 5,921 6,827 10,098 10,985 12,180

Deposits 131,272 162,107 179,356 196,173 223,638 254,947

- Growth (%) 19.0 23.5 10.6 9.4 14.0 14.0

Borrowings 804 2,751 7,283 7,979 9,037 10,267

Tier 2 Capital 3,854 4,575 5,605 4,941 5,583 6,365

Other Liab. & Prov. 5,313 5,545 8,666 8,255 8,699 9,592

Total Liabilities 147,655 182,672 209,757 229,800 260,295 295,703Cash Balances 11,037 17,012 14,082 13,114 8,946 10,198

Bank Balances 1,214 2,205 1,201 1,012 1,147 1,303

Investments 43,061 50,563 54,504 59,243 73,497 82,891

Advances 85,483 105,383 129,725 147,513 166,690 190,026

- Growth (%) 17.1 23.3 23.1 13.7 13.0 14.0

Fixed Assets 2,278 2,343 2,425 2,474 2,718 2,995

Other Assets 4,582 5,165 7,819 6,443 7,298 8,291

Total Assets 147,655 182,672 209,757 229,800 260,295 295,703- Growth (%) 19.1 23.7 14.8 9.6 13.3 13.6

Note: * including Share Application Money of `2,026cr


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May 11, 2012 9

Ratio analysis

Y/E March FY09 FY10 FY11 FY12 FY13E FY14EProfitability ratios (%)NIMs 1.7 1.6 2.8 2.5 2.3 2.4Cost to Income Ratio 56.4 51.9 60.7 57.1 57.6 56.2

RoA 0.4 0.6 0.6 0.2 0.4 0.5

RoE 15.0 25.4 23.2 5.3 10.9 14.4

B/S ratios (%)CASA Ratio 33.4 34.4 35.2 33.3 32.4 32.1

Credit/Deposit Ratio 65.1 65.0 72.3 75.2 74.5 74.5

CAR 13.1 12.2 11.6 12.5 12.2 12.0

- Tier I 7.0 6.8 6.3 8.6 8.2 7.9

Asset Quality (%)Gross NPAs 2.7 2.3 1.8 4.8 5.2 5.2

Net NPAs 1.2 0.7 0.7 3.1 3.0 2.9

Slippages 1.2 1.2 1.3 5.2 3.2 2.5

Loan Loss Prov. /Avg. Assets 0.2 0.2 0.3 0.9 0.4 0.3

Provision Coverage Ratio 54.1 70.4 67.6 40.6 45.0 47.5

Per Share Data (`)EPS 12.2 24.7 27.7 5.1 13.8 20.3

ABVPS (75% cover.) 74.3 105.2 126.4 85.2 95.6 110.1

DPS 2.0 2.2 3.4 2.0 1.5 3.5

Valuation RatiosPER (x) 6.4 3.1 2.8 15.3 5.6 3.8

P/ABVPS (x) 1.0 0.7 0.6 0.9 0.8 0.7

Dividend Yield 2.6 2.8 4.4 2.6 1.9 4.5

DuPont AnalysisNII 1.6 1.5 2.7 2.4 2.3 2.3

(-) Prov. Exp. 0.4 0.3 0.5 1.0 0.5 0.4

Adj. NII 1.3 1.2 2.2 1.4 1.8 2.0

Treasury 0.3 0.5 0.2 0.1 0.0 0.0

Int. Sens. Inc. 1.6 1.7 2.4 1.5 1.8 2.0

Other Inc. 0.5 0.6 0.5 0.5 0.5 0.5

Op. Inc. 2.1 2.3 2.9 2.0 2.3 2.5

Opex 1.4 1.3 2.0 1.7 1.6 1.6PBT 0.7 0.9 0.8 0.3 0.7 0.9

Taxes 0.3 0.3 0.2 0.1 0.2 0.3

RoA 0.4 0.6 0.6 0.2 0.5 0.6Pref. Div. 0.1 0.0 0.1 0.1 0.1 0.1

RoA post Pref Div 0.4 0.6 0.6 0.2 0.4 0.5Leverage 41.2 42.1 40.6 30.9 26.2 26.8

RoE 15.0 25.4 23.2 5.3 10.9 14.4


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May 11, 2012 10

3QFY2012 Result Update | Banking

February 1, 2012

Central Bank of IndiaPerformance Highlights

Particulars (` cr) 3QFY12 2QFY12 % chg (qoq) 3QFY11 % chg (yoy)NII 1,179 1,396 (15.6) 1,432 (17.7)Pre-prov. profit 614 797 (22.9) 815 (24.7)

PAT 113 244 (53.6) 404 (71.9)Source: Company, Angel Research

For 3QFY2012, Central Bank of India reported disappointing results with a53.6% qoq and 71.9% yoy dip in its net profit, due to disappointing operatingperformance as well as higher provisioning expenses. Even the sluggish PATwas aided by reversal of earlier years tax provision of `112cr. Disappointmenton the asset-quality front continued with elevated slippages and ballooningrestructuring. We recommend Reduce on the stock.NIM dips; Asset quality remains under stress: The banks business growth wasmoderate during 3QFY2012, with advances growing by 4.0% qoq (up 14.6% yoy)and deposits almost flat sequentially (up 15.4% yoy). Overall CASA deposit growth

was rather slow at 7.3% yoy, leading to a sharp 244bp yoy fall in CASA ratio to

32.5%. The banks reported NIM fell by a rather steep 47bp qoq to 2.53% on the

back of a 15bp qoq fall in yield on advances and a 9bp rise in cost of deposits.

The bank had to reverse interest income of `110cr on NPAs recognized on

switchover to the system-based NPA recognition platform, which partly

exacerbated the fall in NIM. Asset quality deteriorated during 3QFY2012 as well,

with gross NPA ratio rising to 3.7% (2.9% in 2QFY12) and net NPA ratio climbing

to over 2.0% (1.4% in 2QFY12). Slippages for 3QFY2012 stood at a steep

`1,464cr (annualized slippage ratio of 4.5%) compared to an average quarterly

run-rate of `540cr over the past six quarters. A late starter in CBS implementation,

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement Central Bank of India

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Note: We have not considered any Exposure below`

1 lakh for Angel, its Group companies and Directors

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