Central Bank of India (CENTRALBK) Earnings Call Transcript

Good morning, everyone, and welcome to Central Bank of India's Q2 FY '27 Post-Result Earnings Call. From the management today, we have Shri Kalyan Kumar, MD and CEO; Shri MV Murali Krishna, Executive Director; Shri Mahendra Dohare, Executive Director; Shri E. Ratan Kumar, Executive Director; and Shri Vivek Kumar, Chief Financial Officer. I thank the management for giving us the opportunity and also congratulate the team for a very strong result. I'm handing over now the call to our MD, Shri Kalyan Kumar, for his opening remarks. Thank you, sir.

Yes. Thank you. My colleagues on the Board, Shri Murali Krishnaji, Shri Dohareji, Shri Ratan Kumarji, my senior team present here, and my dear all the analysts and all connected through VC and also present here, good morning. First of all, I congratulate each one of you for this good Q2 '27 result. Your beloved bank, Central Bank of India, total business has been actually grown by 20.54% to INR 8,89,541 crores. And total domestic deposits increased by 14.41% to INR 5,08,509 crores. CASA deposit also stands at 44.65% of total deposits. Global advances increased by 29.83% to INR 3,81,032 crores, in which domestic advances accrued at INR 23,72,939 crores, growth of 27% year-on-year. New entry, we have opened GIFT City branch on 29th June 2026. They contributed in overseas advance of INR 8,093 crores. And in this process, we have given guidance for business growth, 14% to 15%, and we have achieved 20.54%. In deposit growth, our guidance was 10% to 12%, and we have achieved 14.41%. In advances loan, our guidance was 14% to 16%, and we have achieved 29.83%. CASA guidance was 48% plus minus 1%, here, due to obvious reason to mobilization and all. This we could not give the market guidance, and we closed at 44.65%. But towards the rail sector, retail agriculture as you know, Central Bank of India is having its 65% branches in rural and semi-urban area. Red being -- our bread and butter for this, this business grew by 21.11%. The individual sector-wide growth also is very good. Retail we reached to a level of INR 1,12,299 crores and growth of 24.49% year-on-year. Agriculture reached to INR 67,778 crores, and growth percentage 19.92%. MSME, we reached to a level of INR 74,196 crores. Percentage-wise growth is 17.36% year-on-year basis. This is also actually, our guidance to market was 65%, 35% plus/minus 5%. And we have closed at 68%, 32% and that you actually also aligns with our market guidance, which we have given. To us, our efficiency side also business per employee has improved to INR 25.26 crores on year-on-year basis as against to INR 21.48 crores for the quarter ended September '25. In profitability, year-on-year basis for September '26 quarter, net profit for the quarter has increased by 21% to INR 1,469 crores, up from INR 1,230 crores previous year. Operating profit for the quarter stood at INR 2,268 crores from INR 1,786 crores, with a growth of 27%. Net interest income grew by 26.28% on a year-on-year basis to INR 4146 crore in Q2 financial year '27 as against INR 3,283 crores in Q2 financial year '26. Total income for Q2 financial '27 improved by approximately 15% and reached to INR 11,737 crores for Q2 financial year '27. Cost-to-income ratio improvement, but is still -- it is on higher side. It is 58.95% for Q2 financial year '27 as against 62.42% Q2 financial year '26. Cost-to-income ratio, we have given guidance for less than 56%. But here, we would not match the guidance and closed at 58.95%. Major highlight, I would like to make that apart from stock cost that is 37.65%, there was 113 basis point improvement in other operating expenses year-on-year basis. Then -- and quarter-on-quarter also, it will give you comfort that quarter-on-quarter basis also net profit grew by 11% to INR 145 crore in absolute terms to be INR 1,469 crores. Operating profit grew by 3.75%. That is INR 82 crore in absolute terms to INR 2,268 crores. Net interest income grew by approximately 6% to INR 232 crores absolute terms to INR 4,146 crores. Interest income grew by approximately 7% to INR 666 crores in absolute terms to INR 10,357 crore. ROA improved by 3 basis points and stood at 1.03%. Here, I would like to mention, NIM, we have given guidance of 3, above 3, and we have maintained at 3.01%. And slippage ratio, we have given guidance of less than 0.25% and it is at 0.24%. Then regarding asset quality, also, our gross NPA stood at 2.39%. That is also in line with our guidance given to the market that it would be below 2.50%. Net NPA stood at 0.31%. That is also there is an improvement of 17 basis points, and that is also aligned with our guidance to the market. Provision compared ratio stood at 97.16%, and regarding slippage ratio as I told for quarter, it is 0.24%, and it is well within our guidance, less than 0.25% on quarter-on-quarter basis. In that way, I can tell you on almost all the parameter of efficiency, except cost to income ratio and business per branch and CD ratio, I will highlight that also has reached to 75%. Like liquidity coverage ratio improved to 156%. Overall improvement in almost all efficiency parameters and business numbers, and I really -- and all our stakeholders, including our customers, regulators, governments and all you beloved shareholders and stakeholders to this great organization, Central Bank of India. That was my initial remark, I conclude here. Now I'm open to the questions.

[Operator Instructions] We are taking our first question now. We have Mr. Ashok Ajmera of Ajcon Global. Mr. Ajmera, we are waiting for your connection.

Can you hear me now?

Yes, Ajmeraji. Ajmeraji, you are not audible? [Technical Difficulty]

We will move to our next registered member. We have Mr. Sushil Choksey of Indus Equity.

Congratulations to Team Central Bank for excellent performance and a sustainable guidance. Sir, I was looking at your business mix. And can you throw some color? You guided on the CD ratio and the business mix for the second half. But can you see within RAM, where are you seeing growth? Or it's per ticket average housing loans, car loans, which are growing or any other segment like gold loan, which is become a major force at Central Bank, and you all have a very ambitious target, that's what I hear from the marketplace?

Yes. Thank you Mr. Choksey for asking this very good question. Regarding business mix, we have seen ratio of corporate and our RAM which is 38%, 68% aligns with the -- actually, our guidance given to 65%, 35%, plus/minus 5%. And growth of RAM sector was 24%. We reached the level of INR 2,54,273 crores. And within which Retail has grown by 24.49%, agriculture has grown by approximately 20%. MSME has grown by approximately 17%. So good growth here in all these 3 segments, and rightly told by you, this is going to continue because Central Bank of India is having its presence. 65% branches are in rural and semi-urban area, which gives us this capability to actually support this important part of Indian economy. We will continue to grow that. But rightly said by you, to latest growth in the previous quarter, it was also there. But here during the last 2 days, 15th and 16th October, we will did a mid-term strategy meet with our all zonal managers and regional heads. Collectively, we regarding revisting our strategy and focus, which area we must focus and how to grow and not only the next half year, but in longer term also. There -- we have zeroed an important growth engine for gold loan side. We are going to open customized 116 gold loan branches where our TAT would be maximum 30 minutes. And within that, all customization is being done. In gold loan portfolio, we are planning to add a good amount of business in not only next quarter but also next year, I can tell you. Another focus area is SMG. We are having tie-up management with 26 states and. And those are actually good opportunity to give loans to credit linkage to those SMG members that our return is also very good in SMG side. And also, there is a very good opportunity to support these segments. In that way, this gold load, SMG, they are going to be the focus area apart from housing loan, our more than 50% advances under retail comes from housing loan. This is going to be the flag carrier now also. Car loans also are dealer tie-up, both builder and car dealer tie-up are going on. And more and more CASA accounts. Salary accounts we are focusing in this quarter. And huge actually planning we have done for into the educational institutes, the religious trusts and also hospitals and other transport operators in a big way because we have established our marketing setup at different places, 300 marketing offices we have regulated in our way. So with that workforce available and different products available for different segments of customers, those CASA customers will give opportunity in, particularly salary account customer. Good opportunity for first selling our personal account loan also. These are going to be our priority in next quarter. Yes, Thank you.

Sir, I had asked you if you could give me if there's an uptick in average ticket in gold loan not only because of price, but the borrowing pattern in the same for housing loan and car loan because a lot of traditional Indians are going from small cars to SUVs, similar way, gold prices move up and housing market is also 10% to 20% up on a national average basis. So is the number of loans increasing or the average ticket is increasing?

Both. I will give you one example. Very recently, in home loan, INR 22 crores green home loan we have provided. And even ticket size is not a bar for us, anyways is there. Now we have -- I can tell you average ticket size is increasing day by day, for housing loan also, car loan also. So depending upon our credit underwriting and agility of borrower that is never a bar. And naturally, we are more focusing to our good biller side where better titer size is available. But as we are having our branches at rural, semi-urban where loan ticket sizes also -- up to INR 30 lakhs, it is totally online basis. Above INR 30 lakhs, normal underwriting part is there. And the ticket size, as you are saying that it is going to be our priority as we have geared on our C also. We have revisited C structure so that they are in a position to take even big-ticket loan not only in housing loan or car loan processing, but also for MSME loan, 32 centers, places we have identified, separate C managers are posted, so that they can even underwrite a higher ticket size MSME loans. It is both, I will say, numbers of customers and also, ticket size wise also, a good number of customers will underwrite, with the strength, we settlement of India is having now.

Sir, 2 questions. How do you see CASA going through here till March end and the deposit base? I know your guidance number would be 12% to 14%, 15%. But strength of Central Bank has always been CASA. If you look historically over the last 15 years or 10 years, despite being in that time also, deposit was our strength and the franchisee is very strong in Western region. How are we strengthening further for cross-selling this CASA base, you said about salary accounts but what other factors, including digitization, digital apps, cross-selling, you've tied up with multiple insurance as well as mutual funds. You may be tying up for brokerage houses. So to enhance Central Bank's strength with certain multiple new ventures. And second, what is the corporate pipeline looking from now? I understand we are very good at RAM but a balance of 65%, 32 to 65, 35 or 62 to 38. What area of business are we focusing on corporate book to? And the third question would be your outlook on treasury.

Yes. Regarding CASA growth rightly said by you, people love Central Bank of India, having its presence 115 years in service to the nation Therefore, it is being reflected in our CASA numbers also. And I will give you one number. Our CASA has grown by 9.23%. We have crossed INR 200,000 to INR 26,774 crores, growth of 9.23%. Saving has grown by 9.32%. And current accounts also have grown. And actually, the kind of initiatives we have taken. As I told you, we have multiple customer acquisition center. And also government business centers also we have opened. That way, we are geared out to play whatever strength we are having, geographically, you also told Western side, we have good presence, but we are having a good presence in Bihar, Uttar Pradesh and in also Maharashtra side, these are the areas. Madhya Pradesh also, we are having a good number of branches and good presence. 2,658 branches out of 4,622 branches of Central Bank of India are having CASA percentage, 50% and more. That is the extent Central Bank of India is deriving due to its geographical presence and the initiative which we have taken since last 1 year, setting up of the customer acquisition centers, government business centers, placement of the 300 additional marketing offices, 200, 250 marketing users were already there. This 500, 600 marketing teams. And also, we have started wealth management. It is just we are dealing, and we have regulated some marketing officer under wealth segment. And we are going to, in a big way from I understand in to June quarter, it may come in force fully. But now we have started those things also will support our bank in not only mobilizing good CASA accounts, but also mentoring those CASA account with us. The CASA instant of this organization and with the initiatives which we have taken, certainly, it is going to continue. Credit card also next year, in June or like that, we are going to start in our credit card, which will support in mobilizing salary accounts and all. No doubt if salary account increases that it has a good opportunity for cross-selling for all the retail products and also selling of other ancillary business and everything could be there. Cash management services also is going to be launched, very soon 2 modules already launched, other modules in next few months, we are going to launch. That will support us in mobilizing current account from our corporates and also new customers. Regarding your second question, corporate, in corporate, approximately INR 7,000 crores, we are having undisbursed sanction. That we are having. And underprocess is INR 5,000 crores and under consideration INR 11,000 crores. So corporate loan book 24,000 loan book under consideration, we are having. In a very near future, we are sure that we will get good traction in this corporate line, you see previous year, our corporate book was INR 83,000 crores. This year, it has grown by 42%, INR 1,18,666 crores. That is good growth. And actually roads, infrastructure, and also data center technology side, all these things were our focus area -- these were focus area. Food processing, also some finances to NBFC, hospitality sector. These were actually major area where we focused. And in the coming quarters also, we are going to focus on. Regarding treasury, as treasury yield is funding. We ended by more than 7%, 7.19% yield during the 30th September period. Now also, it is progressing high at 7.25%, 7.40%. So that actually due to global turmoil and also rising rate interest scenario and also rising inflation and also having U.S. rate at 5.35 plus percent. That scenario actually doesn't be conferred to our better treasury income. If you see our previous quarter from INR 843 crores to this quarter, INR 1,023 crores. That was reduction. Mark-to-market challenge was there. I think that look, coming scenario also, we are observing as yield is getting increased in indirect circumstances from treasury, there are challenges. Though our treasury team has done a good job. They are INR 56 crores by selling IPOs, by participating in IPOs, and also in the higher condition the reinvestment side also, we will invest our -- reinvest our maturing the security and all to get a better benefit. The outlook of treasury, the best opportunity. Market is not who you are aware because in the side, which is more exposed to market condition, is a challenge and in my opinion, is going to continue in near future also. But building our portfolio, and look not only driving the interest rate, but also understanding properly and building our portfolio and reinvesting things and the opportunity available within the law. I feel that treasury outlook would be challenged, but will contribute to the profitability, and it has contributed this quarter also.

We'll take our next question now. We have Mr. Ashok Ajmera back in the queue here from Ajcon Global.

Sorry, sir, there was some technical problem. And I have missed some of your replies also. Can you hear me now?

Yes, yes, Ajmeraji, you are always welcome.

Sir, congratulations for a very good set of numbers. And the bank is really doing very well, sir, even under your lead leadership also. Sir, going forward, like most of the questions are initial, your address, you have answered. But one is that on the ECL provisioning, I might have missed your answer that how prepared we are? What is the total quantum will be to be provided? So what is your -- can you give some color on that, sir, some information?

Yes, we are -- actually, ECL provisioning, we are -- previous quarter also, I told INR 1,525 crores for stage 1, stage 2, we have provided until now. And stage 3, 100% provision is there. And bank is prepared for meeting this requirement. Models are being prepared, data quality and all those aspects we are working. And we expect that we have given guidance previous quarter approximately INR 5,000 crores to INR 5,500 crores may be required. And with the kind of profit Central Bank of India is garnering, we are sure that it is not going to be a challenge for Central Bank of India for meeting ECL requirement, schedule for implementation from 1st April '27.

Sir, a point well taken, sir. Sir, we are doing very well in the retail side of the loans. Even our home loan rates are also very, very competitive. Going forward, sir, I might have missed your answer whether -- what is the plan of increasing the corporate book? And where do we stand and what is the average yield and now we are expecting from the corporate book? And what is the sanctioned pipeline and the proposals which are in pipeline, sir?

Yes. See, previous year, if you see our corporate book in September '25 was INR 83,000 crores. And this September '26, we have closed by INR 1,18,666 crores, growth of 42%. And out of total book, 32% comes from this corporate side. The increase on year-on-year basis 42% in corporate book side. And our actual pipeline -- regarding pipeline answering your question, pending disbursement is INR 7,000-plus crores and proposal of INR 5,200-plus crores is under process and INR 11,000 crores under consideration. They may come in the DG and all, approximately INR 24,000 crores corporate loan book -- at present, we are actually having. You will have good growth in copper side. Regarding the yield. This year, our overall, average yield was 7.87% in the yield on advances, if I can tell you, 7.87. And major areas where we are focusing upon, it is renewable energy, roads and also data center, some exposure in real estate, hospitality, and manufacturing segment, NBFC, agri, food processing, logistics side, these are the major areas where actually we are focusing upon in this quarter and coming quarters.

Very good, sir. Sir, coming to the recoveries, recovery from the return of book has been decent. So going forward, what do we expect? We expect some more major bounty from this? What is our total return of book balance outstanding? And how much do you expect on an average in percentage term? Secondly, on the recoveries, that old aviation account. So what is the status there, that additional collateral, which we had of INR 1,200 crores or INR 1,500 crores whether that has been realized and how much recovery has already taken place and how much more we do expect to recover from that account, sir?

See, recovery was INR 485 crores in this quarter. Good number we have got. And if I talk about the pool, it is INR 31,301 crores. We are having ample pool now also as of written-off accounts. from where we can actually recover good significant amount. Previously, you have seen more than INR 2,700 crores we have recovered for the full year. This year also, I find sufficient ground and sufficient resources available to recover INR 2,500-plus crores in this segment. Regarding answering your aviation sector account recovery to INR 700 crore pricing. And auction process is going on, and we have got that also. We may get INR 700 crores in this aviation amount in this current quarter or next first quarter. There are other amounts also, big accounts also and smaller accounts also from where we will improve our recovery efforts. I can assure you that kind of book and things available with us, recovery numbers are going to be better what we have done in this quarter. I am fully combined about that.

Very good, sir, about the recovery for the small account under the OTS. How are we framing our policies and are we liberal to get at least those accounts where 100% provision has already been made, and the securities are minimal. What is our emphasis of recovering all those small recoveries, which may make a good amount in the absolute terms?

Thank you, Ajmeraji for asking this question. See smaller accounts for that special OTS scheme, we have got approval from our Board. And it is very transparent process. We are coming with this technological capability. We call it eOTS, and here of NPA and of security and provision, these are the logic to which is that this amount if you pay your account would be done through digital process and branch process is, we are going to very soon. There is another scheme. Through, there has been a small wealth accounts, we are actually recovering good amount of recovery in a very transparent process in the -- and you are a -- because we deal with the retail business, good and slippage under 10 lakh segment. So they have all these measures. Electronic OTS and also this scheme through agents. And all these things are going through a very effective tool and support us in recovering denied amount as far as regulatory guidelines and also cleaning up our books. So that side also, our focus is there and the properly variable cultural security up there, I have given you 1 example, previous year total auction of properties was 485. This half year, we reached that number. very effective monitoring of process. That's also giving us actually real both customers on the negotiation table. And through OTS, we are recovering significant amount and closing those accounts through OTS also. In thay way I can tell you from recovery side, asset quality which we observe 2.39 and 0.31 NPA. It is going to be continuously. You will find improvement in these numbers in coming days.

[Operator Instructions] We are taking our next question now we have Mr. Rajesh Agarwal of AUM Capital Markets.

From the last few quarters, we have been tracking Central Bank and let me congratulate you for the kind of numbers you have given in last quarter and followed by this quarter. It was really good, I would say, and we are very -- I would say we are very satisfied with the kind of numbers because we have recommended to so many of our clients. There was just 1 query which I would like to have a clarification like reported gross NPA, net NPA, slippages, they all improved, yet provisions went up. Can you throw some light on the breakdown of the provisioning, whether into standard assets or floating or technical? Why this specific went up? And which segment maybe specifically retail, MSME or, where are the reasons for this entire provision? And the last one would be what is your cost guidance for FY '27?

Yes. Thank you, for your good words for Central Bank of India. You are right, our gross NPA, net NPA and slippage ratio are under control. And provisions have increased actually. And trade cost also, you see 53 is in this matter. Though they have will because trade cost, we have given a guidance of the demand of 2.75% and 3.53% and DCR is 97.16%, that is also well within our guidance given to the market. But the reason what you have asked, actually, we must build enough provision in good times for facing any challenge or anything which may come in future. With that, it is very resilient, and I will say the resilient approach which bank has taken. And for that purpose, we must have our provision coverage ratio have increased since last quarter. That is the main reason. Otherwise, actually, another one important reason. Our standard advances also have grown significantly. Because previous year on September '25, provision on standard advances was 30 or 37, now it is INR 399 crores. The debt increase is there. These are the reason behind increase in trade cost side. I hope I have answered your question.

[Operator Instructions] We'll take our next question. We have Mr. Ashlesh Sonje of Kotak Securities.

Sir, a few questions from my side. Firstly, on the ECL, you have reported a credit cost of roughly 50 basis points in this quarter. Do you have a sense of how much your credit cost will be next year after you have transitioned to the ECL regime?

Ashlesh, thanks for this position. Actually, ECL, we are preparing, I understand banks, which are having better grade underrate would have better control over the credit cost. And this year, credit cost 0.53 is actually, you must have observed the answer which I have just now given you. We have just comfort and to make you understand how Central Bank of India is been back on been preparing itself to face the consequences of implementation of ECL that will give you answer. March '25, our slippage ratio was 1.47. March '26, it came down to 1.16%. And this quarter, it is 0.24 and for half year, it is 0.41% to 0.45%. What I mean to say is, we are preparing ourselves, graduating ourselves to take challenge of ECL starting from better credit underwriting quality. So there, we are having one processing centers that we call CPAC, credit processing center, which is normally at all regional office, the CPAC set up is there. Earlier e-principal approval concept was not there. It is -- you all are aware that in branches, credit underwriting skills are very rare. Therefore, all branches, whatever leads they are generating, they will send to the credit processing centers at regional office. They will give for sanction. And also, the underwriter -- the role of this underwriting quality after that monitoring of those advances, monitoring SI and also proper alignment with the field force, persons and also regional collection centers, head office, war room and all the technological capability also for and generating early warning signal LRs and acting upon those alerts in a very structured where we have implemented these aspects, therefore, credit quality division is doing a good job and gaining good asset quality. Starting from underwriting to post-credit monitoring also. So in that, we -- I can tell you this credit cost -- next year, also, I am expecting quarter-on-quarter basis, it is going to be -- remain less than 0.75%, up to 0.75% only. This guidance which we have given. We are going to maintain this guidance in next. Ashlesh, hope I answered you question.

Understood, sir. Sir, one follow-up there. On the ACL onetime transition, you indicated that the quantum is roughly INR 5,000 crores. That would be taken as a direct hit to the net worth on the 1st of April. Is that understanding correct?

Actually, see, our total requirement will be INR 5,000 crores to INR 5,500 crores. Out of that INR 1,525 crores already, we have kept a additional provision. So the difference only will have to take. And the way we are making profit, it will not see a bigger fall. And options given by regulator, both taking onetime, we will discuss together and we'll take a call on this. Currently, I am not in a position to comment on this part. Whether I will take it one way or will stagger it.

Understood, sir. Sir, and just one last thing. The ROA seems to have improved quite a bit over the past few quarters. Is there some -- can we assume that this ROE will remain, let's say, about 1% for the foreseeable future?