The Hindu Business Line : Central Bank net falls 15% on high cost of deposits

Mumbai, April 24 Central Bank of India’s net profit for the quarter ended March 3, 2008 fell 14.8 per cent to Rs 127.2 crore against Rs 149.13 crore in the same quarter last year, due to higher interest cost.

The board has recommended a dividend of 20 per cent, which is Rs 2 per share for the fiscal 2007-08.

Speaking to reporters, Ms H.A. Daruwalla, Chairman and Managing Director, said the bank had raised high cost deposits in the fourth quarter to meet the increased credit demand, which pushed up the cost of deposits.

Other income increased to Rs 359 crore (Rs 219 crore). Interest expended increased to Rs 1,702 crore (Rs 1,055crore). Net interest income fell to Rs 538 crore (Rs 720 crore).

The cost of deposit was 6.24 per cent (4.98 per cent). The net interest margin (NIM) fell to 2.19 per cent (3.61 per cent).

“Our NIM was not up to the mark. Advances were being drawn in the last quarter for which sanctions were given nine months ago. So we went in for high cost deposits, between 10-10.5 per cent,” said Ms Daruwalla.

About Rs 9,900-crore worth high cost deposits matured in the fourth quarter, putting pressure on the bank’s margins, she added.

The bank also made a one-time provision for employees’ pension under Accounting Standard- 15, of Rs 875 crore, which has been taken out of its reserves. “We have made the provision for the full amount at one go. There will be no impact next year,” Ms Daruwalla said.

The proportion of low cost CASA deposits (current account and savings account) to the total deposit also fell to 36.1 per cent (41.9 per cent).

Follow-on offer

The bank’s Tier I capital is at 5.42 per cent, which is below the minimum requirement of 6 per cent. The bank would look at a follow on public offer or hybrid instruments for raising capital, but after the June 2008-09 quarter, she said.

“In this fiscal we will focus on NIM, net interest income and return on assets. We will also improve CASA, which is dwindling for the industry as well,” she said.

For the fiscal 2008-09, Central Bank is looking at a business growth of 25 per cent, credit growth of 27 per cent and deposit growth of 24 per cent.

On Thursday, shares of Central Bank of India closed at Rs 96.9, up 2.32 per cent against the previous close of Rs 94.7, on the BSE.

More Stories on : Financial Performance | Public Sector Banks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Margdarsi MD to get Yudhvir award

Why sub-prime is not a crisis in India

HDFC Bank net rises 37% on higher income

SBM share demat almost done

Central Bank net falls 15% on high cost of deposits

Strong retail growth lifts SBT net up 18%

Oriental cover for Tata project

Karnataka Bank board meets

Banks asked to follow legal procedures for taking possession of hypothecated goods

RBI to consider controls on working capital credit by banks