Angel Broking neutral on Central Bank of India

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Angel Broking neutral on Central Bank of India

Angel Broking has maintained neutral rating on Central Bank of India in its November 2, 2011 research report.

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Angel Broking has maintained neutral rating on Central Bank of India in its November 2, 2011 research report.

"Central Bank of India reported a 35.6% yoy drop in its net profit to Rs 244cr (for 2QFY2012), above our estimates due to higher fee income and recoveries and lower provisioning expenses than estimated by us. The bank has switched over all accounts worth Rs 10lakhs and above, while the rest (Rs 26,000cr comprising 20% of loan book) will be switched over in 2HFY2012. At the CMP, the stock is trading at 0.7x FY2013 ABV."

"The bank's business growth was moderate during 2QFY2012, with advances growing by 1.7% qoq (up 12.7% yoy) and deposits increasing by 1.3% qoq (up 12.2% yoy). CASA ratio managed to improve by 24bp qoq to 32.8% on the back of 2.5% qoq growth in saving account deposits during 2QFY2012. Cost of deposits for 1HFY2012 stood at 7.0% (6.8% in 1QFY2012), leading to reported NIM remaining flat at 3.0%. Recoveries for the quarter stood strong at Rs 50cr, registering growth of 194.1% qoq. Forex gains were also strong for 2QFY2012 at Rs 74cr (Rs 14cr in 1QFY2012), leading to sequential 15.1% growth in other income to Rs 324cr. The bank's asset quality deteriorated during 2QFY2012, with gross NPA ratio at 2.9% (2.3% in 1QFY2012) and net NPA ratio at 1.4% (0.9% in 1QFY2012). Slippages for 2QFY2012 stood at Rs 1,244cr (annualized slippage ratio of 3.8%) compared to Rs 598cr in 1QFY2012. A late starter in CBS implementation, the bank commenced the switchover to NPA-based recognition system only post 1QFY2012. The bank has switched over all accounts worth Rs 10lakhs and above, while the rest (Rs 26,000cr comprising 20% of loan book) will be switched over in 2HFY2012."

"At the CMP, the stock is trading at cheap valuations of 0.7x FY2013E ABV compared to its trading range of 0.5-1.5x with a median of 1.15x since its listing in 2007. However, due to near-term concerns on asset quality because of the pending switchover of accounts worth Rs 10lakhs and below to system-based NPA recognition, we maintain our Neutral view on the stock," says Angel Broking research report.

Bodies Corporate holding more than 50% in Indian cos

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To read the full report click on the attachment