Central Bank of India on Thursday reported a 26% increase in net profit for the first quarter ended June on the back of improved net interest margins (NIMs) and net interest income (NII). NIMs were up at 2.86% from 1.84% in 2009-10. “At these levels, NIMs may not be sustainable but we will certainly aim to keep it in the range of 2.25-2.5% for the fiscal,” said S Sridhar, chairman and managing director, Central Bank of India.
The bank decided to reduce bulk deposits in order to bring down the cost on deposits. “We did not raise any bulk deposits in first quarter,” Sridhar said. The bank had shed Rs 20,000 crore of bulk deposits in March itself, due to which the cost on deposits fell down to 5.53% in the first quarter of FY11 from 6.46% a year ago. “We do not see a return to the regime of high cost bulk deposits,” said Sridhar.
The bank witnessed credit growth of 23.12% annually and deposit growth of 13.09% annually.
The bank recently revised the interest rates on term deposits. Net interest income (NII) grew 94% annually from Rs 577 crore last year to Rs 1,119 crore as on June 30.
On the asset quality front, net non-performing assets (NPAs) stood at Rs 815 crore as on June-end, up from Rs 603 crore a year ago. The bank’s provisioning coverage ratio of 68.75% currently is below the norm of 70% stipulated by Reserve Bank of India (RBI). The bank hopes to achieve 70% within September.
Capital adequacy ratio stood firm at is at 12.8%, with Tier-I capital at 6.03%.
The bank has asked the government to infuse Rs 2,500 crore to enable it to achieve 8% Tier-I by March 2011. The bank has set its base rate at 8%. “We lost some business due to the base rate but margins have improved,” Sridhar said.
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