Central Bank to raise Rs 700 cr tier-II capital

Central Bank of India is raising Rs 700 crore through issue of bonds that would qualify as tier-II capital. Crisil has assigned the bond issue a rating of AA table and said the bank's weak asset quality, modest capitalisation levels and average earnings profile temper these rating strengths.

Central Bank's asset quality is weak. Its gross non-performing assets (NPAs) stood at 6.85 per cent and 9.01 per cent as on as on March 31, 2006, and March 31, 2005, respectively.

These NPA levels are substantially higher than the system average. The bank's tier-I capital adequacy of 7.19 per cent and net worth to net NPA coverage of 3.1 times as on March 31, 2006, are lower than those of peer banks. The bank's earnings profile is average, with a net profitability margin of 1.4 per cent in 2005-06.

Central Bank has assets of Rs 74,700 crore as on March 31, 2006. The bank has a stable low-cost resource profile, as seen in a high proportion of current and savings (CASA) deposits.

CASA deposits constituted 46.8 per cent of the total deposits as on March 31, 2006. Central Bank's liquidity profile is comfortable, underpinned by high statutory liquidity ratio (SLR) investments (it had an SLR of about 35 per cent as on March 31, 2006.