The Telegraph
Since 1st March, 1999
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Centurion Bank sinks deep into the red

Mumbai, Sept. 28: Centurion Bank today reported a mammoth loss of Rs 161.84 crore for the year ended March 31, 2002 with the capital adequacy ratio plummeting to 4.16 per cent, way below the required level of 9 per cent as mandated by the Reserve Bank of India (RBI).

The bank also announced that it has posted a loss of Rs 3.66 crore in the quarter ended June 30 even as the senior management argued that a massive clean-up operation would enable it to return to the black by the end of this fiscal.

The loss posted by Centurion Bank was due to certain extraordinary provisions and write-offs relating to previous periods in respect of assets and liabilities taken over from the erstwhile 20th Century Finance Corporation (TCFC) consequent upon its merger with the bank.

These included Rs 47.18 crore towards hire-purchase assets taken over from TCFC, Rs 19.40 crore towards interest on deposit liabilities and an additional depreciation of Rs 19.34 crore on leased assets portfolio of TCFC. Further, towards normal provisioning requirement, the bank made a provision of Rs 76.55 crore towards non-performing assets. These include a provision of Rs 32 crore in respect of loans to capital market brokers and the balance being provisions towards other loans portfolio.

While Centurion Bank’s gross NPA stood at Rs 229 crore — it was 11.84 per cent of its total portfolio, net NPA is at 5.82 per cent. However, the bank posted an operating profit of Rs 14.41 crore for the year ended March 31, 2002 and Rs 7.80 crore for the first quarter of this year.

Speaking to newspersons here today, V. Janakiraman, chairman & managing director, maintained that though the bank’s capital adequacy ratio has declined, its “capital has not eroded and it is still solvent.”

“We have managed to clean up the bank and the difficulties faced by the bank are not expected to recur in the future,” he said.

Janakiraman was also hopeful that the bank would soon find a new strategic partner by the end of the year to whom 26 per cent is planned to be hawked. Another option before Centurion was to merge with a large nationalised bank (Andhra Bank). According to estimates, Centurion Bank would need capital infusion to the tune of Rs 160 crore.

The chairman said the three foreign partners of Centurion—Keppel Bank, IFC, Washington and Asian Development Bank—whose combined holding is put at 30 per cent, have informed the bank that they would fulfil their obligation in the event of a rights issue. Janakiraman also did not rule out the possibility of the bank placing its shares below par value to the strategic investor.

Centurion Bank had earlier received interest from reputed foreign banks of the likes of HSBC, Citibank among others for picking up the 26 per cent stake. However, these proposals did not fructify due to variety of reasons that included branch location and “discomfort” shown by some of them towards the balancesheet of the bank available then. Janakiraman was hopeful that with its latest balancesheet, it should now start receiving fresh enquiries.

The bank has over the recent past moved away from corporate advances to retail assets and that from bulk deposits to retail deposits. Ratio of corporate advances to total advances has come down to 38 per cent. Its capital market exposure has also come down by Rs 220 crore.

However, the bank has exceeded the 5 per cent ceiling stipulated by the RBI on advances to the capital market. It has committed to the central bank that this ratio will be brought down by the end of this fiscal.

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