Deutsche Bank Equity Research has maintained a BUY recommendation on Centurion Bank of Punjab. The bank has very rapidly tackled the issue of rising NPLs in 2-wheeler finance by deliberately tightening credit filters and withdrawing from some regions. Centurion is also preemptively rationalizing the personal loans portfolio to preclude NPLs spinning out of control. Here too filters have been tightened and the bank is focusing more on the segments which have demonstrated favourable credit loss characteristics.
Growth, however, has not faltered as SME lending has grown 140%, mortgages 100% and construction equipment 22%. Integration of the merger with Lord Krishna Bank (LKB) is smoother than initially apprehended. Technology should be integrated by Apr’08. Low-cost deposits in these branches have risen from 16-17% to 19-20%.
With NIM having stabilized and asset quality managed, concerns have reduced. Deutsche maintain BUY with a target of INR55.