Deposit rate cuts help Central Bank net rise 6%; NPAs jump

Saturday, 8 August,Mumbai: State-run Central Bank of India on Saturday reported a marginal 6% rise in net profit at Rs 203 crore in the June quarter on account of reduction in cost of deposits and lower provisioning for bad loans.

However, the profitability was dragged down by a rise in non-performing loans.

“Our cost of deposits has come down by around 20 basis points. We are aware that NPAs are going to happen and the resultant erosion of interest income.

“So, the best way is to mitigate this by reducing cost and our single largest cost factor is interest outgo and we have been trying to reduce it by focusing on CASA,” chairman and managing director Rajeev Rishi told reporters here today.

Accordingly, cost of deposits came down to 7.02% in the quarter from 7.18% a year ago, he said.

“We had to provide less for NPAs. In fact, there was certain movement back from the restructured book. This also contributed to net profit,” he said, adding that NPA provisions, including those for restructured assets, came down to Rs 576 crore from Rs 655 crore.

Gross non-performing assets rose to 6.70% from 6.15%, while net NPA too jumped to 4% from 3.62%. Fresh slippages in the quarter stood at Rs 1,869 crore.

However, net interest margin came down to 2.74% from 2.87% due to reduction in its base rate.

“NPAs are contingent on many factors. We did hope that the environment will improve, but we still see stresses in certain segments like steel, power, infra.

“Going forward, we have seen majority of these accounts already slip into NPAs. So, residual pipeline would not be that bad. I see NPA level would be around 6%,” Rishi said.

The bank wrote-off Rs 297 crore worth of loans and the upgrades and recoveries stood at Rs 198 crore and Rs 300 crore, respectively.

It sold Rs 16 crore of non-performing loans to asset reconstruction companies in the period. Incremental restructuring in the quarter was of Rs 148 crore.

Total business rose by 5.84% at Rs 4,51,739 crore.

Deposits of the bank grew 7.40% to Rs 2,58,607 crore, while advances increased by 3.81% at Rs 1,93,132 crore.

The bank is targeting a deposit growth of 12.69% and loan growth of 9.81% in this fiscal.