Central Bank of India gains after strategic tie-ups to expand loan portfolio

Share of Central Bank of India gained nearly 2 per cent in trade on Wednesday after the public sector lender announced strategic tie ups with IKF Home Finance Limited and Samunnati Financial Intermediation & Services Private Limited (SFISPL) for expanding its loan portfolio.

The stock of Central Bank of India opened 1.71 per cent higher at Rs 35.71 on BSE compared to its previous close of Rs 35.11. At 12: 56 PM, the shares were trading 1.1 per cent higher on BSE at Rs 35.50 apiece.

On the NSE, the shares witnessed a similar rise and were trading 1.14 per cent higher at Rs 35.5.

With a net profit of Rs 1,582.20 crore in FY 22-23, the Central Bank of India is keen to increase its earnings. The bank posted a net profit of Rs 418.43 crore in the June 2023 quarter, a significant dip from the Rs 571.03 crore it earned in the April quarter.

The public sector lender has also recently launched BASEL-III Compliant Tier-II bonds for raising Rs 1,500 crore. This includes a green-shoe option of Rs 1,000 crore and a base size of Rs 500 crore. The bonds will be issued on a private placement basis. The bonds will be allotted today, August 30, and will mature in 10 years.

Central Bank of India’s tie-ups with SFISPL and IKF Home Finance

The public sector lender, in two separate filings, announced that it was co-ordinating with IKF Home Finance Limited for MSME and home loans and Samunnati Financial Intermediation & Services Private Limited for agricultural and MSME loans. The loans will be offered at competitive rates. The co-lending arrangements will help the Central Bank of India expand its portfolio.

According to the filing to the stock exchanges, the arrangement with IKF Home Finance Limited will see the National Housing Bank-registered entity originate and process loan proposals under MSME and retail sectors. The Central Bank of India will take 80 per cent of the MSME and home Loans under its books as part of the mutually agreed terms. IKF Home Finance Limited will service the loan account throughout the tenure of the dues. IKF Home Finance operates across six states- Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka and Telangana. It is managing assets worth Rs. 696.10 crore.

The Central Bank of India has worked out a similar arrangement with SFISPL for agricultural and MSME loans. The NBFC is working in 22 states presently and has assets under management worth Rs 1,150 crore.

Central Bank of India BASEL-III compliant Tier-II bonds

The public sector lender also announced that it had received bids worth Rs 1,515 crore on its BASEL III compliant Tier II bonds (series VI). The non-convertible, unsecured, taxable bonds are in the nature of debentures. “Bank received total bids of Rs 1516 Crore in overwhelming response from investors and the issue was oversubscribed by 3 times against the base size. Further, the bank has decided to accept a bid of Rs 1500 Crore at a coupon rate of 8.80%,” the announcement read.  The CRISIL AA-/Stable rating bonds have a call option on or after five years with the approval of the Reserve Bank of India.