Central Bank of India: Cheap Valuation, But Can Profits Catch Up?

$CENTRALBK Central Bank of India is gradually emerging as an attractive value play among PSU banks, but whether its improving fundamentals translate into a sustained re-rating remains the key question for shareholders. The stock trades at around 0.8x FY26 book value, below the PSU banking median of 1.0x, while offering a healthy 3.7% dividend yield. This provides downside support for long-term investors, though the valuation discount reflects lingering concerns over earnings quality. FY26 performance was steady. Net interest income rose 2% to ₹14,171 crore, while net profit increased 15.4% to ₹4,369 crore, despite a one-time deferred tax charge of ₹632 crore. The stronger profit growth suggests underlying operating performance is improving. The biggest positive is robust credit growth. Gross advances climbed 18.8% to ₹3.4 lakh crore, led by retail, agriculture and MSME loans, which together grew 21%. Retail loans surged 25.7% to over ₹1 lakh crore, improving the mix towards diversified, higher-yielding segments. Management expects 14–16% loan growth and 10–12% deposit growth in FY27. It also plans to strengthen corporate banking, recruit over 900 officers, invest nearly ₹2,700 crore in technology and expansion, and scale up wealth management, forex and digital businesses. Asset quality continues to improve, with gross NPA at 2.67%, net NPA at 0.49%, and the slippage ratio declining to 1.16%. ROE stands at 11.9%, reflecting a healthier franchise than in previous years. For shareholders, the positives are attractive valuation, improving asset quality and strong credit growth. However, slower NII growth, margin pressure and continued investor scepticism could keep the stock trading below peers. Overall, it appears better suited for patient, long-term investors than those seeking a quick re-rating.