LOWER TREASURY GAINS MAY WEIGH ON CENTRAL BANK BOTTOMLINE

In the second half of the current fiscal, Central Bank does not expect to match the bottomline performance of the first half. The recent increase in G-sec yields is likely to dent treasury gains, which could make it difficult for the bank to outperform the first half net profit of Rs 581 crore, according to Mr S. Sridhar, Chairman and Managing Director.


“Our treasury profits in the second half are not likely to be as much as the first half. However, we will try to offset the shortfall in treasury gains with higher operational profits and NPA recovery,” Mr Sridhar told reporters here on Monday.

The first half net profit of Rs 581 crore was higher than the net profit of Rs 571 crore recorded by the bank during 2008-09. The net treasury gains made by the bank during the first half of 2009-10 was Rs 371 crore compared with Rs 121 crore in the same period in the previous year.

Sluggish credit offtake
The other factor that could impact the bottomline performance in the second half is the sluggish growth in credit offtake. As against the targeted 20 per cent growth in credit for the current fiscal, the bank's credit growth during April-December 2009 has been 11 per cent.

“Credit offtake has started to pick up since December 2009. This trend should intensify in this quarter (January-March). But we may not be able to achieve the 20 per cent credit growth target that we had set for ourselves,” Mr Sridhar said.

Raising capital
On whether the bank intends to raise more capital this quarter, Mr Sridhar said it would evaluate the capital requirement sometime this quarter. There are indications that the Central Bankwould get about Rs 700 crore of capital infusion from the Government by March.

Rate hike
On expectations of the Reserve Bank of India tightening liquidity in the coming weeks, Mr Sridhar said that he expects “some signalling” to rein in food inflation. The liquidity in the system could be reined in possibly through changes in the Cash Reserve Ratio, he said.

Source: http://www.blonnet.com/2010/01/05/stories/2010010551590600.htm