Central Bank of India Presentation

7/28/2019 Central Bank of India Presentation

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Group 2

Jyoti Belani PG 11 004Priyanka Manchandani PG 11 025

Tejas Somaiya PG 11 055

Khusboo Kothari PG 11 086Jaydeep Rathod PG 11 104


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A government-owned bank, is one of the oldest and largestcommercial banks in India.

Bank has 4100 branches and 270 extension counters across 27Indian states and three Union Territories.

Established in 1911, Central Bank of India was the first Indiancommercial bank which was wholly owned and managed byIndians.

Sir Pherozesha Mehta was the first Chairman of a truly'Swadeshi Bank'.

Presently, Shri. M.V.Tanksale Chairman & ManagingDirector. Subsidiaries : Centbank Financial Services Limited

Centbank Home Finance Limited


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Government of

India 79.15%

FI s 10.32%

FII s 2.48%

Insurance Cos. 0.61%

Other Body 1.39%

Public 5.76%

Others 0.29%

%Holding

Government of

India

FI s

FII s

Insurance Cos.

Other Body

Public

79.15%


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1531

1073

797713

0

200

400600

800

1000

12001400

1600

1800

Rural Semi Urban Urban Metropolitan

Branches

4114


5/23

80827 92212115748 130468 153601

116365

151506 167813188286

203538197192

243718283561

318754

357139

0

100000

200000

300000

400000

500000600000

700000

800000

Sep'08 Sep'09 Sep'10 Sep'11 Sep'12

Business (in Cr)

Total

Deposit

Credit

CAGR 15%

CAGR 17.84%

CAGR 16.0%


6/23

Total Business of the Bank increased to Rs 357,139 crore from Rs 318754

crore in Sep-11, recording Y-o-Y growth of 12.04%.

ROA improved to 0.58% in Q2-2012-13 from 0.46% in Q2-2011-12.

NIM stood at 2.68% in Q2-2012-13.

Gross NPA % is at 5.54 % and Net NPA % at 3.80%

CRAR under Basel II is at 11.51%.

CASA showed a rise of 3.49 % from 63,076 Cr to 65275 Cr.

Total Loans and Advance increased by 14.7% from 1,31,407 Cr to1,50,725 Cr.

EPS 7.85.

Overview of Performance


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2.59

2.993

2.532.59

2.642.68

2.2

2.3

2.42.5

2.6

2.7

2.82.9

3

3.1

Mar'11 Jun'11 Sep'11 Dec'11 Mar'12 Jun'12 Sep'12

NIMs

%


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Amount (in Cr)

12.16%

10.57%

12.35%

64.%

Segment Amount (in Cr)

Corporate

Credit

98,363

Agriculture 18,677

MSE 14,692

Retail 18,964

TOTAL 1,53,601


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Equity capital:

The bank has authorized capital of Rs.3000.00 Crore as on 31st March

2012, the bank has issued, subscribed and paid up equity capital of

Rs.736.12crore.

Out of this, 79.15% shareholding of shares is with the Government ofIndia as of 31st March 2012.

Tier 1 Capital: 10978.41 CrTier 2 Capital : 6485.64 Cr

Total Capital : 17464.04 Cr


10/23

The bank has adopted :

Standardized approach for credit risk.

Basic indicator approach for operational risk and

Standardized duration approach for market risk.

Capital requirements for credit risk

Fund Based : 10705.32 Cr

Non Fund Based: 578.89 Cr

Capital requirements for market risk:Interest rate risk : 439.73CrForeign exchange risk: 25.4 Cr

Equity Risk: 239.32 CrCapital requirements for operational risk:

685.35 Cr


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The amount of capital that a firm, usually in financialservices, needs to ensure that the company stayssolvent.

Economic capital is calculated internally and is theamount of capital the firm should have to support anyrisks it takes on.

It is used for measuring and reporting market andoperational risks across a financial organization.

It measures risk using economic realities rather thanaccounting and regulatory rules, which have beenknown to be misleading.

It is thought to give a more realistic representation of afirm's solvency.


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It is the amount one would anticipate receiving on an

investment that has various known or expected rates

of return.


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Spread 6.30%

Operating Expenses (%) Operating Expenses /Deposits & Borrowings

1.79%

Cost of Funds (%) Cost of Liabilities +Operating Expenses

8.48%

Expected Return Spread + Cost of funds 14.78%

Significance Level 5% 1.64

Credit Value at Return (%) Expected Return *Significance Level

24.244%

Total Assets 147512.85Provisions & Contingencies 2168.61

Expected Loss Total Assets / Provisions& Contingencies

1.47%

Economic Capital Credit Value at Return -Expected Loss 22.774%


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1.47%

22.77%

95%


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RAROC an adjustment to the return on an investment that

accounts for the element of risk.

It gives decision makers the ability to compare the returns on

several different projects with varying risk levels. By discounting risky cash flows against less risky cash flows,

RAROC accounts for changes in the profile of the

investment. In general, the higher the risk, the higher the

return.


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NIM Revenue Expenses 2.34%

ROC Expected Return *Economic Capital

3.3667%

Risk Adjusted Return NIM + ROC Expected Loss 4.237%

RAROC Risk Adjusted Return /Economic Capital

18.603%


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Profitability-Subsequent to the Basel III norms, the capital of manybanks will reduce by around 60% because of the phased removal ofcertain components of capital from Tier 1.

In addition, the risk weightings are expected to grow by nearly 200%.The twin impact of these two stipulations will greatly reduce the ROE

and the profitability of banks Capital acquisition-Indian banks need to infuse additional capital

over the next 5 years. Different estimates of additional capital infusion have been announced

by various agencies. International credit ratings agency, Fitch, estimates this figure to be at

around USD 50 billion, while ICRA projects a figure of around USD80 billion. Macquarie Capital Securities predicts that there will be a USD 35

billion dilution in the existing capital of PSU banks subsequent toadoption of the stringent Basel III capital accord.


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Liquidity Needs-One of the basic tenets of prudent banking is toborrow long and lend short.

There must be a match between the duration of liabilities and theduration of assets, which is at the heart of asset-liabilitymanagement.

Limits on lending-A leverage ratio of 3% has to be adhered toby all banks, which translate into a limit on assets at 33 times ofthe capital. Before the recent financial crisis, international bankswere leveraging 50 times, but this was not captured in the riskframework as low risk assets allow higher leverage.

This anomaly is sought to be removed by having a simple leverageratio of 3%.

Thereby, if a bank wishes to acquire more assets, it can do so onlyby increasing its capital.


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Bank consolidation-Basel III will set off a process of churning inthe banking industry.

Smaller banks will find it difficult to meet the new Baselguidelines, and a process of consolidation is underway.

Smaller banks will find it difficult to raise more capital and meetthe liquidity requirements.

This will result in reduction of the scope of operations of thesmaller banks, rendering them less profitable.

Stability in the Banking system-Basel III incorporates bothmicro-prudential regulations and macro-prudential regulations. Micro-prudential guidelines ensure the viability and risk

compliance of individual banks, while macro-prudentialguidelines target the stability of the banking system as a whole.


20/23

As per our internal assessment, additional capital required at

the end of the transition period for Basel-III i.e. 31/03/2018 is

Rs. 14,067 crores .

This is proposed to be raised through follow on public issue.

Bank has robust plan to contain gross NPA at 3.50% and Net

NPA at 2.00% .

Return on Average Assets will be significantly improved to

0.50% by the financial year 2012-13

Leverage technology to increase fee based income. Shifting focus from wholesale banking to retail banking.


21/23

The Finance Ministry has recently decided to inject of Rs

12,000 crores in 12 public sector banks including State Bank

of India, Central Bank of India and the United Bank of India

in the form of investments.

Out of the proposed Rs. 12000 crores SBI will get 0.56 %,CBI will get 0.99 % and UBI will get 0.73 %.

~ 1200 Cr to CBI.

Recently , Large lenders asked to handhold small banks. in

which CBI was asked to divide banks inseven pools and alarge bank has been appointed as coordinator for each group,

to improve internal policies and procedures.


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Central Bank of India to be leading

Indian Bank

Allahabad Bank

Bank of MaharashtraThe banks have been asked to continuously interact and work

collectively on issues such as human resources, e-governance,

internal audit, fraud detection and protection, recovery, asset-

liability mismatch and business process re-engineering.

Adding fuel towards consolidation of small banks with larger

banks


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Central Bank of India Presentation