Central Bank of India shares hit 5% upper circuit on fundraising plan

Shares of Central Bank of India were locked in 5% upper circuit on the domestic bourses on Tuesday after the public sector lender unveiled a fundraising plan. The PSU bank in an exchange filing said its board of directors has approved raising up to ₹1,500 crore during the current fiscal through the debt market. The base issue size is ₹500 crore with a green shoe option of up to ₹1,000 crore.

As per the exchange filing, Central Bank of India will raise capital through the issuance of non-convertible redeemable unsecured Basel Ill compliant tier 11 bonds, subject to market conditions and necessary approvals. Under the Basel-III capital regulations, the minimum capital requirements for banks globally have been raised from 2% in Basel II to 4.5% of common equity, to withstand future periods of stress.

“To raise capital through issuance of Non-convertible redeemable unsecured Base Ill compliant Tier 11 Bonds for amount upto ₹1500/- Crore with a base size of ₹500/- Crore and a green shoe option upto ₹1000/- Crore during the FY 2022-23 subject to market conditions and necessary approvals,” Central Bank of India said in a BSE filing.

Boosted by the fundraising plan, shares of Central Bank of India opened 3.7% higher at ₹32, against the previous closing price of ₹30.85 on the BSE. Extending opening gains, the banking stock hit a 5% upper circuit of ₹32.35, while the market capitalisation climbed to 28,083 crore.

The PSU bank stock trades 23% lower than its 52-week high of ₹41.80 touched on December 14, 2022, while it hit a 52-week low of ₹16.10 on May 16, 2022. On the year-to-date (YTD) basis, the share has risen more than 50%, while it has rallied nearly 89% in the past six months. In one month, the state-owned lender has gained 27%, while it has fallen 12% in a week.

For the second quarter ended September 30, 2022, Central Bank of India reported a 27% year-on-year (y-o-y) increase in net profit at ₹318 crore, against ₹250 crore in the year-ago period. The profit was driven by higher net interest income and lower provisions.

Net interest income rose 24.5% YoY at ₹2,747 crore versus ₹2,206 crore in the year-ago period. Non-interest income, however, dropped 12% YoY to ₹910 crore as against ₹1,034 crore in the same period last year, dented by a decline in treasury income and other receipts (priority sector lending certificates and others).

On the asset quality front, the gross non-performing assets (NPAs) declined to 9.67% of gross advances in Q2 FY23, against 14.90% in the preceding quarter. The bank made a technical write-off of ₹9,514 crore during the quarter under review. Net NPAs too declined to 2.95% of net advances, compared with 3.93% in the same period last year.