How do you see Central Bank of India after the latest quarter results for Dec-20?

Central Bank India reported virtually flat net profits for the Dec-20 quarter at Rs.165 crore. This is despite the fact that the total revenues were nearly 10% lower at Rs.6,584 crore. In terms of business mix, Central Bank saw flat treasury income but retail lending income was down as was corporate lending. Both got hit by lower rates and weak business off-take.

Interest income fell with lower rates but on the positive side, this also resulted in a fall in the interest outgo. Despite a 30% fall in the operating profits yoy, Central Bank managed flat PAT growth. This was largely on the back of lower loan loss provisions. For the Dec-20 quarter the provisioning was sharply down by 40% at just about Rs.765 crore.

The bigger worry for the bank would be on asset quality and capital adequacy. For example, the gross NPAs were lower at 16.3% but still this figure is too high in absolute terms to give any degree of comfort. The return on assets or ROA at 0.19% is well below the normal median benchmark of 0.55% to 0.60% for banks. The area of concern for CBI is capital adequacy at just about 12.39% as it would constrain fresh loan book creation.