Central Bank of India

Central Bank of India: Buy

CMP: Rs.17.30

Book Value: Rs.46.08

Face Value: Rs.10

Target: Rs.27/31

SL: Rs.16.30.

Introduction: Central Bank of India is a commercial bank. The bank’s segments include Treasury Operations, Corporate/Wholesale Banking, Retail Banking and other Banking business. 

Shareholding Pattern: The promoters holding in the company stood at a whooping 89.46%, while Institutions and Non-Institutions hold 6.67% and 3.87%, respectively; leaving very little stocks in the hands of retail investors. This adds value to its shares.

Financials: For the June, 2019 quarter, the total income of the company came as Rs.65,18.37 crore, while its net profit for the same quarter came as Rs.115.71 crores, showing a turnaround.

Triggers: Public sector lender, Central Bank of India informed recently that it has raised Rs. 500 crore through Tier II bonds.

The tier-II bonds under Basel III is a hybrid subordinated instrument with equity-like loss-absorption features. These rated instruments are expected to absorb losses once the “point of non-viability” (PONV) trigger is invoked. ICRA has assigned ‘A+’ rating to the proposed bond offering.

#To meet regulatory norms for capital adequacy, Central Bank of India plans to raise Rs.2,000 crore capital through tier-II bonds.

#Central Bank will be one of the two public sector banks that will continue to work as an independent bank to strengthen national presence.

#The BSE group ‘A’ stock of face value Rs.10 has touched a 52 week high of 37.95 and 52 week low of Rs.17.70, which indicates that there is minimum diwnside in the scrip.

#After the corporate tax cut bonanza, the clamour for personal income-tax reductions to boost demand has got louder and we could see some reflection of it in the upcoming budget.

Analysts at Bank of America Merrill Lynch expect the government to cut income tax to stimulate demand if the ongoing Diwali festival demand turns out to be really weak.

Since, Banks are a proxy to an economy, this sector would be one of the biggest beneficiaries of tax cut. Why? Because strengthening of corporate balance sheets will have a direct positive bearing on their loan books.

Conclusion: The stock of Central Bank of India looks attractive at the current price and is must buy for short to medium term Investmenta.