Public sector lender Central Bank of India's (CBI) second quarter (July-September) net profit shrank nearly 36% year-on-year to Rs 244 crore on higher provisions against non-performing assets. Its net interest income or the difference between interest earned and expended too rose at a slower pace nearly by 4% to Rs 1,396 crore.
All in all, the quarterly numbers were below the street expectations.
"We will dedicate next quarters for recovering and upgrading of loan accounts,” said Mohan Tanksale , CMD , Central Bank of India addressing a press conference in Mumbai.
“We started implementing the process of NPA generation through computer a bit late. We hope to complete it between December and March. This could further dent our NPA levels by another 52 basis points. However, we aim to grow our loan book by 18% for the full fiscal as the next two quarters, the so-called busy season, will generate good credit demand for us."
As per the Reserve Bank of India's mandate, every bank will have to convert the process of non-performing asset generation from manual to computer system wherein an loan will be identified as NPA automatically as and when it falls below certain benchmarks. The implementation of such system will initially increase banks' NPA levels.
CBI's gross NPA ratio stood at 2.94% compared with 2.29% in April-June quarter. Net NPA ratio too worsened from 0.87% to 1.37% quarter-on-quarter. Consequently, the bank had to provide for the incremental bad loans. Provisions and contingencies increased to Rs 431 crore as against Rs 240 crore a year back. This has dented bank’s profit margin.
The bank's loan book expanded nearly 13% Y-o-Y to Rs 1.30 lakh crore while deposits grew just above 12% to Rs 1.88 lakh crore. The current account and savings account (CASA) rose 7% to Rs 61,788 crore. CASA ratio stood at 33% of total deposits.
“We want to focus more on retail banking including credit and deposits. We would bring down corporate lending from 64% to 60%. The retail will constitute the rest 40%,” added Tanksale, who took charge as CMD of the bank five months back.
CBI’s September quarter net interest margin (NIM) stood at 3%, little changed from the previous quarter. The bank is deliberating over revising its savings rate. It is exploring different product innovations.
“A rise of 100 basis points in savings rate would impact our interest margin by 22 basis points. However, we will bring down our focus on bulk deposits by around 4,000 crore and will also increase our lending rates. This is to off-set the impact. We may slash rate of interest on bulk deposits, which currently forms 33% of our total deposits but will come down below 30%,” Tanksale told Moneycontrol.com.
Central Bank of India shares on Tuesday tanked more 5% to close the day at Rs 101.95 on the NSE.
Source: www.moneycontrol.com
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