Central Bank posts 22% dip in Q4 net on higher provisioning

The dip in profit came even as the net interest margin for the bank widened to 3.47 per cent during Q4.

State-run Central Bank of India has posted a 22 per cent dip in net profit at Rs 132.70 crore for the fourth quarter ended March 31 on the back of an unexpected provisioning on employee pensions and gratuity,even as margins showed an impressive rise.

The lender’s net profit had stood at Rs 171.06 crore for the corresponding January-March period last year. For the year ended March 31,2011,the bank’s net profit was up 19 per cent at Rs 1,252 crore.

Explaining how provisioning hit the bank in the March quarter,its Chairman and Managing Director S Sridhar said,”last fiscal,the provisions for employees had stood at Rs 221 crore which went up to Rs 1,467 crore in FY 11 and a majority of it was done in the last quarter.”

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A majority of the bank’s peers have witnessed outgo on the pension and gratuities front where the lenders are required to make additional provisioning for both retired as well as yet-to-retire employees.

The dip in profit came even as the net interest margin (NIM) for the bank widened to 3.47 per cent during Q4 versus the year before period’s 1.81 per cent. This resulted in the core net interest income more than doubling to Rs 5,326 crore.

Sridhar said the higher NIM is sustainable and the bank expects to maintain it at the 3.25 per cent levels for the fiscal (FY 12).

He attributed the widening in NIMs to a strategy of substituting high-cost debt with the low-cost CASA (current and savings account) deposits and the implementation of the more transparent base rate system in funding.