Central Bank of India — Q3 FY25 earnings call

Call held 20 Jan 2025

Management summary

Central Bank of India delivered a robust Q3 FY25 performance, characterized by record profitability and significant improvements in asset quality. The bank has already exceeded its full-year FY24 profit within nine months. Management is focused on a 'RAM-led' (Retail, Agri, MSME) credit strategy and maintaining a high CASA base, while proactively preparing for ECL transitions with additional floating provisions.

Highlights

  • Net Profit reached ₹959 crores for Q3, up 33.57% YoY, the highest in 15 quarters

  • 9-month Net Profit of ₹2,752 crores has already surpassed the entire FY24 profit of ₹2,549 crores

  • Gross NPA improved significantly to 3.86% from 4.50% YoY; Net NPA stands at 0.59%

  • Net Interest Margin (NIM) expanded to 3.48%, up 20 bps YoY

  • Gross Advances grew 12.99% YoY to ₹2.70 lakh crores, led by RAM segment growth

  • CASA ratio remains strong at 49.18% of total deposits

  • Provision Coverage Ratio (PCR) reached a healthy 96.54%

  • Capital Adequacy Ratio (CRAR) improved to 16.43% from 14.74% YoY

Key financials

  1. Net Profit ₹959 Cr +33.6%YoY
  2. NIM 3.5%
  3. Gross NPA 3.9%
  4. Net NPA 0.59%
  5. RoA 0.87%
  6. CASA Ratio 49.2%

What they filed

Q1 FY27: revenue up 12.8%, net profit up 3.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue8,235 8,542 8,653 8,623 8,777 +7%9,070 +6%9,698 +12%9,726 +13%
Net profit926 966 1,106 1,284 1,234 +33%1,265 +31%748 −32%1,325 +3%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Advances
₹2.71L Cr Total
  • RAM (Retail, Agri, MSME) ₹1.89L Cr 69.9%
  • Corporate ₹81,476 Cr 30.1%

Guidance & targets

Volume

  • Business Growth Volume · FY25 · High confidence 10% to 12%
    Earlier, we have given that our business growth will be 10% to 12% that we are going to touch that band.

    — M.V. Rao, MD & CEO

  • Advances Growth Volume · FY25 · High confidence 14% to 15%
    Likewise, for your advances also 14% to 15% band we have given that we are going to be there in that band.

    — M.V. Rao, MD & CEO

  • Deposit Growth Volume · FY25 · High confidence 8% to 10%
    Likewise, in deposit growth, 8% to 10% guidance what we have given in April that continues to hold good.

    — M.V. Rao, MD & CEO

Profitability

  • Return on Assets (RoA) Profitability · March 2025 · High confidence 1%

    Previously 0.75% to 0.85% → 1%

    It is with confidence I can tell that we are going to touch 1% for the March, for the ROA.

    — M.V. Rao, MD & CEO

  • Cost to Income Ratio Profitability · FY25 · Medium confidence 50% to 52%
    But our guidance in this year, we have given 50% to 52%. Now we are at 58%.

    — M.V. Rao, MD & CEO

Margin

  • NIM Margin · FY25 · High confidence above 3%
    NIM, our guidance was above 3% and we are at 3.48% as that, definitely, we are sticking to the floor level of 3%.

    — M.V. Rao, MD & CEO

Other

  • Recovery in write-off accounts Other · FY25 · High confidence ₹1,500 crores

    Previously ₹1,443 crores → ₹1,500 crores

    It should top INR1,500 crores, if anything... well past the INR1,443 crores that we had recovered during the last year.

    — Mukul Dandige, CFO

Risks & concerns

  • Cost-to-Income Ratio Miss

    medium

    Current ratio is 58% against a guidance of 50-52%, primarily due to heavy IT investments and staff costs.

    Both acknowledged

  • ECL Implementation Impact

    medium

    Estimated requirement of ₹2,360 crores for ECL transition, though the bank is building provisions incrementally.

    Analyst acknowledged

  • Lagging Deposit Growth

    low

    Deposit growth of 5.34% is significantly lower than credit growth, though management claims high liquidity and self-sufficiency.

    Analyst downplayed

Areas of evasion (1)

  • Specific details on the 'aviation account' recovery were kept vague until crystallization.

Q&A highlights

2 direct
ECL Transition and Provisioning Requirements Direct
Based on the RBI's draft circular... we have roughly around INR2,360 crores or thereabouts as the number [required for ECL].

Reveals the bank's estimated impact of the upcoming Expected Credit Loss (ECL) norms, showing they have already started building a ₹500 crore floating provision buffer.

Asked by Atishay Choudhary, ICICI Securities

Deposit Growth and Liquidity Direct
We are not in need of funds right at this moment... Our focus was purely on the CASA, that's why we could be able to improve our position 20 basis points.

Explains why deposit growth (5.34%) is lagging advances growth (13%), highlighting a deliberate strategy to avoid high-cost deposits and focus on margin-accretive CASA.

Asked by Ashlesh Sonje, Kotak Securities

Equity Dilution and Government OFS Partial
We are very much hopeful that we may get the positive news on the OFS front. But at least the indication to our intent to dilute the equity, we may think of for a small amount of QIP in this quarter.

Addresses the critical issue of meeting public shareholding norms and potential capital raising, indicating a preference for an Offer for Sale (OFS) by the government but keeping a QIP option open.

Asked by Sushil Choksey, Indus Equity Advisors

2 min read 5 chapters

Detailed narrative

Record Profitability and Asset Quality Turnaround

Central Bank of India reported a Net Profit of ₹959 crores for Q3 FY25, marking a 33.57% YoY increase. The bank's asset quality has seen a significant turnaround, with Gross NPA dropping to 3.86% and Net NPA to 0.59%. Management highlighted that the 9-month profit of ₹2,752 crores has already surpassed the full-year profit of the previous financial year, driven by higher yields and controlled credit costs (0.49%).

Strategic Shift to RAM and CASA Focus

The bank continues its strategic rebalancing towards the RAM (Retail, Agri, MSME) segment, which now constitutes 70% of the loan book compared to 30% for Corporate. RAM advances grew by 17.99% YoY. On the liability side, the bank maintains one of the industry's best CASA ratios at 49.18%, deliberately avoiding high-cost bulk deposits and certificates of deposit to protect Net Interest Margins, which stood at 3.48%.

ECL Preparedness and Provisioning Buffer

Management provided high transparency regarding the transition to Expected Credit Loss (ECL) norms, estimating a total requirement of approximately ₹2,360 crores. To mitigate this, the bank has already created a floating provision of ₹500 crores over the last two quarters. The Provision Coverage Ratio (PCR) remains exceptionally high at 96.54%, providing a significant cushion against future asset quality stress.

Operational Efficiency and IT Investments

While the bank missed its cost-to-income ratio target (58% actual vs 50-52% guidance), management attributed this to heavy investments in IT infrastructure and digital transformation, including a new 'super app' with 200+ services. They expect the cost-to-income ratio to improve to 50% or below in the next financial year as these technology initiatives begin to generate higher income and operational efficiencies.

Capital Position and Future Growth

The bank's capital position is strong with a CRAR of 16.43%, up from 14.74% YoY. Management indicated that the bank is now 'self-generating' capital for future growth. Regarding the 25% public shareholding norm, they expressed hope for a government Offer for Sale (OFS) but mentioned the possibility of a small QIP in the current quarter to signal intent to dilute equity.

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