Central Bank of India reported a sharp reduction in bad loans during the April-June quarter, which analysts said was aided primarily by significant write-offs.
The state-owned lender’s gross non-performing assets (NPA) fell to 4.95 percent of advances compared with 14.9 percent in the year-ago quarter. The bank wrote off Rs 7,856 crore of loans in the April-June quarter, Central Bank said July 17.
Net NPAs narrowed to 1.75 percent against 3.93 percent a year earlier.
Banks write off loans when there is no scope of recovering them from borrowers. Typically, banks need to set aside 100 percent of the written-off loan amount as provisions, which impacts profitability.
The gross NPA ratio was the lowest since 4.8 percent in March 2013 and the net NPA was the lowest since 1.37 percent in September 2011, according to Bloomberg data.
In absolute terms, gross NPAs fell to Rs 10,891 crore at the end of June from Rs 29,002 crore in the same quarter last year. Net NPAs were at Rs 3,718 crore on June 30, compared with Rs 6,785 crore a year earlier.
The provision coverage ratio was 92.23 percent, an improvement of 562 basis points (bps) on year. One basis point is one-hundredth of a percentage point.
Why NPAs improved
The major reason for the reduction in NPAs was the higher technical write-off and an increase in provisions.
Total provisions increased 44 percent to Rs 1,420 crore from Rs 986 crore a year earlier, according to the bank’s presentation to investors. Sequentially, provisions fell 7.61 percent from Rs 1,537 crore at the end of March.
Central Bank of India provisioned Rs 632 crore towards standard assets and Rs 244 crore towards NPAs.
NPAs in the ‘corporates and others’ category reduced sharply to Rs 2,781 crore from Rs 14,915 crore. NPAs in the retail, agriculture & allied, and micro, small and medium enterprise categories also improved.
NPAs in agriculture & allied were Rs 3,650 crore as on June 30 compared with Rs 6,127 crore a year earlier.
Also read: Central Bank of India Q1 results: Net profit jumps to Rs 418.4 crore
Central Bank of India reported a 78 percent increase in net profit to Rs 418.4 crore in the first quarter of FY24, although sequentially, earnings fell 26.8 percent.
The bank’s net interest income rose 48 percent to Rs 3,176 crore, while the net interest margin was at 3.62 percent, up 74 bps. Net interest income is the difference between interest earned by the bank and the interest paid.
Deposits increased 6 percent to Rs 3.63 lakh crore and gross advances were up 12.95 percent to Rs 2.2 lakh crore.
The Basel-III capital adequacy ratio – the level of the minimum capital required to cover depositors’ money – improved to 14.42 percent at the end of June compared with 13.33 percent a year ago, with a common equity tier 1 ratio of 12.13 percent, an improvement of 109 bps.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
