Techno Funda Note - Central Bank of India :: HDFC Securities

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Technical Query-Central bank, Ambuja Cements, SpiceJet, RCom, Balkrishna Industries, Everest Industries, Gravita ::Business Line

 

Technical-Central bank, Ambuja Cements, SpiceJet, RCom, Balkrishna Industries, Everest Industries, Gravita ::Business Line

 

Trends: Crompton Greaves, SAIL, Central Bank, Reliance Broadcast, Micro Technologies, Lovable Lingerie :: Business Line :: Business Line

 

Technicals: Crompton Greaves, SAIL, Central bank, Reliance Broadcast, Micro Technologies, Lovable Lingerie :: Business Line

 

Central Bank of India Ltd Q2FY13 Result - Team Microsec Research

Central Bank of India ::Prabhudas Lilladher, Banks/Financials conference

􀂄 Quality over growth: The bank is looking at growth of 14%-15% in FY13 as the
current slowdown gives the opportunity to consolidate. Bank is trying to build
on retail fee income streams with doubling of 3rd party distribution income,
significant increase in ATMs (better inter-bank ATM fees) and targeting
significant increase in debit cards by yr end.
􀂄 Asset quality Outlook: CBOI believes that lumpy accounts have been accounted
for and delinquencies should normalize at ~2.0% going forward with ~Rs30bn of
annual slippages and ~Rs30-40bn of recoveries/upgrades expected. Of
Rs14.4bn of slippages in 1QFY13, Rs 8.0bn related to 5 accounts and
management expects ~Rs5bn of recoveries from 1Q13 slippages in the near
term.
􀂄 Other Highlights: (1) On the HR front, the management expects average age of
the employees to come off significantly in 5 yrs due to high retirements
currently. (2) The bank has bulk deposit of ~31% and inline with FinMin directive
aims to bring dependence down to <15 3="3" aims="aims" cboi="cboi" deliver="deliver" margins="margins" of="of" p="p" to="to">by 4Q13, ROAs of 0.8% in FY13 and 1.0% by FY14, as margins improve and
delinquencies remain under control.

Angel Broking - Central Bank of India - RU4QFY2012- Result Updates ::PDF link

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Central Bank of India - RU4QFY2012

Central Bank of India – SELL ‘Remains vulnerable ::IIFL

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FY12 loan growth to be modest driven by shift in credit profile
Having grown advances ahead of the system in the past two years (23%
CAGR), we believe that Central Bank’s loan growth could be lower in the
current fiscal. In Q1 FY12, loan book contracted by 4% qoq making it
difficult for the bank to catch-up with the system in weakening credit
demand scenario. Further, Central Bank is in the process of shifting its
credit profile from the large and mid corporate segment (64% of
advances) to retail and SME segments. Objectives behind this strategy
being diversification of portfolio and structurally improving the loan yield.
NIM to stabilize after correcting sharply in Q1 FY12
A significant improvement in deposit profile (decline in share of bulk
deposits) drove substantial margin improvement (140bps) in FY11. In Q1
FY12, NIM corrected by 50bps qoq to 3% due to increase in CoD, decline
in investment yield and material correction in the C/D ratio. Central Bank
raised its Base Rate by 75bps on August 1st which should support
improvement in loan yield. CASA recovery and shedding of high-cost bulk
deposits should largely offset the impact of higher retail term deposits
cost. Hence, NIM is likely to stabilize near 3% in near-to-medium term.
NII would grow behind loan growth in FY12 due to margin decline.
Asset quality to worsen further keeping credit cost elevated
Central Bank has seen high slippages in recent quarters with the
annualized delinquency ratio near 2%. Unlike other PSU banks, these
slippages were not driven by transition to system recognition of NPLs. The
bank started this exercise meaningfully from Q2 FY11. This implies that
elevated delinquencies would continue in ensuing quarters. The
challenging macro environment would only exacerbate asset quality
deterioration. We estimate FY12 delinquency ratio at 1.6% against bank’s
aggressive expectation of 1.3-1.5%. Credit cost is estimated to increase
to 0.9-1% in FY12 and FY13. We expect 39% CAGR in LLP over FY11-13.
Further valuation de-rating likely; initiate coverage with SELL
We expect Central Bank to underperform Bankex over the next six
months. On the grid of the two key concerns haunting the sector viz
slowing credit growth and asset quality deterioration, Central Bank ranks
much higher than peers. Further, bank’s RoA would remain comparatively
lower (0.7-0.8%) even after the anticipated improvement. Though
valuation appears cheap both in absolute terms (0.8x FY13 P/adj.BV) and
relative terms (15-20% discount to peers), it could de-rate further as
macro challenges intensify. Expected poor performance in the next two
quarters would also be an overhang. We initiate coverage on Central
Bank with a SELL rating and 9-month price target of Rs94.

Central Bank of India::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Asset quality to remain under pressure
 In 1QFY12 Central Bank of India's (CBOI) slippage was ~INR6b (annualized slippage
ratio of 1.8% compared with 1.3% in FY11), of which the management stated about
INR3b was technical in nature.
 CBOI has not yet moved to system-based recognition of NPA and expects to transit
its portfolio through system-based recognition of NPA over the next two quarters
(has received government approval), which will keep slippages at an elevated level.
 Credit monitoring is a key focus area for CBOI and management guidance is to
contain FY12 GNPA and NNPA below 2.25% and 1% respectively.
CBOI FY12 margin to be 3%+
 In 1QFY12 reported margins declined ~50bp to 3%, but adjusted for interest on IT
refund in 4QFY11 the decline would have been ~15bp.
 While the cost of deposits is increasing, ~73% of assets are on a floating rate basis,
which enables the bank to swiftly pass on the impact of rising cost of funds and
maintain margins at ~3%.
 CASA growth was healthy(15% YoY in 1QFY12) led by strong traction in saving
deposits (17% YoY in 1QFY12), which will help CBOI to contain the cost of funds.
The management expects traction in savings deposits to continue and guidance is
for SA deposits growth of 20%+ in FY12.
Focus on profitability, efficiency rather than growth
 CBOI has a strong franchise network of 3,800+ branches, which is underleveraged
with asset/branch of INR574m (v/s an average of ~INR910m) and business/branch
of INR850m (v/s an average of INR1.3b) leaving ample scope for improvement.
 The management has now assigned the responsibility of business to zonal offices
rather than mere administrative functions. This will strengthen the sanctioning
process and reduce turnaround time, leading to better productivity.
Valuation and view
 With the new management's focus on profitable growth CBOI's core performance is
expected to improve in the coming quarters, but asset quality pressure will act as
on overhang on the stock. It trades at 3.6x FY11 EPS of INR28 and 0.8x FY11 BV.
Not Rated.

Central Bank of India: INVEST in Rights Offer- Business Line

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Investors can subscribe to the rights offer of Central Bank of India, a nationalised bank with predominant presence in Western, Eastern (excluding North East) and Central India. For every five shares held by investors in the bank, two were entitled to three rights, which were priced at a 40 per cent discount to the prevailing stock price (before shares went ex-rights on 16 March 2011).

Central Bank of India is the third largest bank in terms of branch network; however, it is the 11th largest commercial bank in terms of loan book size. After lagging its peers on operating parameters, Central Bank has been catching up with other banks in terms of productivity, profitability and margins.

At the current price (Rs 134 per share) adjusted for the rights, the stock trades at one-time its estimated FY-12 adjusted book value. This is at a considerable discount to peers such as Union Bank of India, Bank of India and Bank of Baroda, which are trading anywhere between 1.3 times and 1.6 times book value, based on consensus estimates. The price-to-estimated FY-12 earnings multiple of Central Bank is at modest 4.5 times even after adjusting for dilution for rights issue.

Central Bank of India - Raise estimates, target price; Buy:: Anand Rathi

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Central Bank of India - Raise estimates, target price; retain Buy 

n       Raise estimates, target price; maintain Buy. Central Bank’s (CBoI) 2QFY11 profit rose 20.7% yoy, driven by robust net interest income (NII) and higher NIM. We raise our EPS 23.9% for FY11e and 19.4% for FY12e, given higher NIM assumptions. Due to better RoE, we raise our target price, from `178 to `296 (1.4x FY12e PABV). We retain Buy as we expect better NIM to improve profitability. At 1.1x FY12e ABV, valuations are modest.

CENTRAL BANK OF INDIA 2QFY11: Margins up 56bp QoQ:: Motilal oswal,

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CENTRAL BANK OF INDIA 2QFY11: Margins up 56bp QoQ; Asset quality stable QoQ

Central Bank of India (CBOI IN, Mkt Cap US$2.2b, CMP Rs239, Not Rated) 2QFY11 NII grew 135% YoY and 20% QoQ to 13.5b. While NII growth is strong, sharp decline in trading profits, moderation in fee income growth (down 25% YoY) and increase in opex (up 75% YoY) led to just 21% YoY and 13% QoQ growth in profits to Rs3.8b.

Key highlights

-          Strong NII growth of 135% YoY and 20% QoQ led by sharp improvement in margins. NIM expanded by 56bp QoQ (164bp YoY) led by stable cost of deposits (down 5bp QoQ) and sharp improvement in yield on loans (up 55bp QoQ) and yield on investments (up 23bp QoQ). Management guided for 3%+ NIM in FY11.

-          Loan growth remained strong at 8% QoQ (25% YoY) to Rs1.15t. Deposits grew 9% QoQ (10.8% YoY) to Rs1.67t. CD ratio improved to 69% in 2QFY11 vs 61% in 2QFY10, stable QoQ. Management expects loan growth of 23-24% and deposits growth of 16% in FY11.

-          Non-interest income fell 40% YoY (flat QoQ) to Rs2.5b due to sharp decline in treasury profits and decline in fee income. Treasury profits declined to Rs430m vs Rs600m in 1QFY11 and Rs1.6b in 2QFY10. Recoveries were strong during the quarter at Rs550m. Fee income grew 21% QoQ but declined 26% YoY (due to higher base).

-          Operating expenses increased 74% YoY basis to Rs8.1b (up 17% QoQ) led by sharp increase in both employee and establishment expense. Cost to core income ratio declined to 55% v/s 61% in 2QFY10 (flat QoQ).

-          Asset quality remained stable QoQ. GNPA in absolute terms were flat QoQ at Rs26.3b; however, in % terms GNPA declined 15bp QoQ to 2.28% and NNPA declined 11bp QoQ. PCR remained stable QoQ at 70% v/s 69% in 1QFY11.

-          Gross slippages in the quarter stood at Rs2.3b (annualized slippage ratio of 88bp) and Rs5.2b in 1HFY11 (annualized slippage ratio of 1%).

-          Bank will raise capital via rights issue in 2HFY11 to boost CAR.

Valuation and view

-          We expect Central Bank to report EPS of Rs34 in FY11 and Rs42 in FY12. BV would be Rs138 in FY11 and Rs175 in FY12.

-          RoA is expected to improve to 0.8% in FY11-12 vs 0.6% in FY10. On back of higher leverage, RoE will look superior at 26%+ over FY11-12. Our earning estimates do not factor in the rights issue.

-          The stock trades at 5.7x FY12E EPS and 1.4x FY12E BV. Not Rated.