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Thursday, July 25, 2013

Central Bank Q1 net plummets 94% on higher provisioning, depreciation

A sharp jump in provisions towards bad loans and depreciation in investments dragged down Central Bank of India’s net profit in the April-June quarter. Net profit dropped 94 per cent to Rs 22 crore in the April-June quarter against Rs 336 crore in the year-ago period.

In the reporting quarter, the public sector bank made bad loan provisions of Rs 825 crore, including Rs 189 crore towards restructured assets, against Rs 382 crore (including Rs 196 crore towards restructured assets) in the year-ago period.

Provision towards investment depreciation was at Rs 170 crore against a write-back of Rs 39 crore.

The incremental increase in bad loans and restructured loans during the quarter was at Rs 2,073 crore and Rs 3,024 crore, respectively.

Doubtful advances

As per the notes to the bank’s accounts, it had to make provisions for the standby letters of credit extended to certain merchant exporters and manufacturers of diamond jewellery, including Winsome Diamonds and Jewellery, getting devolved as funded exposure aggregating Rs 956.33 crore. Further, an outstanding advance of Rs 370 crore to a marketing federation under the Agriculture Ministry became doubtful and provision had to be made.

The bank’s net interest income (difference between interest earned and interest paid) increased by 11.54 per cent to Rs 1,537 crore (Rs 1,378 crore in Q1FY2013). Non-interest income grew 86 per cent at Rs 598 crore (Rs 322 crore).

Net interest margin (net interest income/ average total assets) improved a tad to 2.68 per cent in the reporting April-June quarter against 2.64 per cent in the year-ago period.

According to Chairman and Managing Director M.V. Tanksale, the bank will increase the spread (over the base rate) on large corporate loans to protect the net interest margin.

Given the downturn in the economy, the bank will revise downwards the projected credit growth target of 17-18 per cent for FY2014, he said. However, the deposit growth target of 16 per cent remains.

Tanksale said once the economic environment improves, the bank’s inherent strengths will show up.

Central Bank of India will aim to bring down gross non-performing assets and net non-performing assets in percentage terms to 5 per cent (6.03 per cent as at June-end 2013) and 3 per cent (3.85 per cent) by March-end 2014.

The Central Bank of India share closed at Rs 62.05, down 3.8 per cent on the BSE.

Winsome Diamonds CDR

The corporate debt restructuring cell will consider the banking system’s Rs 4,000-crore exposure to Winsome Diamonds for possible restructuring on Thursday, said Tanksale.

The outcome of the forensic audit conducted by banks on Winsome will decide whether the loan can be restructured.

Source: thehindubusinessline


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