Central Bank of India Hits 18-Month Low, Trades at 52% Discount from Peak

Sharp Decline Pushes PSU Bank Stock into Extended Bearish Trend

Shares of Central Bank of India plummeted 11% on April 2, 2025, hitting an 18-month low of ₹36.86 per share. This decline marks the third consecutive session of losses, bringing the three-day cumulative fall to 16%. The last time the stock traded at this level was in September 2023.

The downward trend has been persistent, with the stock closing in the red for the past eight months, losing 33% of its value over this period. At current levels, Central Bank of India is trading 52% lower than its peak of ₹77 in February 2024, raising concerns among investors about further downside potential.

• Stock crashes 11% in a single session, hitting an 18-month low.

• Three-day cumulative decline reaches 16%, extending the losing streak.

• Currently trading 52% below its February 2024 peak of ₹77.

QIP Issuance Triggers Selling Pressure in PSU Bank Stocks

The latest slide in Central Bank of India’s share price coincides with the recent Qualified Institutional Placement (QIP) of shares, which saw the bank issue fresh equity to institutional investors. The QIP, conducted along with Punjab and Sind Bank, UCO Bank, and Indian Overseas Bank, was aimed at reducing the Indian government’s stake in these banks to comply with the Minimum Public Shareholding (MPS) norms.

The Life Insurance Corporation of India (LIC) emerged as the top investor in the QIP, along with major participants such as SBI Life Insurance, ICICI Prudential Life Insurance, IIFL Finance, and a group of pension funds. However, despite high-profile institutional participation, the dilution of existing shareholders’ equity led to a sharp decline in share prices.

The Indian government continues to hold a dominant 89.3% stake in Central Bank of India, with LIC controlling an additional 3.16%. Meanwhile, foreign institutional investors (FIIs) own just 1.3%, and general shareholders account for 3.6%, according to the latest shareholding data for December 2024.

• QIP dilution weighs on stock prices, triggering a sell-off.

• LIC leads institutional investment, along with top insurance and finance firms.

• Government stake remains high at 89.3%, limiting public float.

Government’s ₹2,000 Crore Fundraising Plan and Compliance with MPS Norms

In January 2025, the Indian government approved a ₹2,000 crore capital infusion plan for five PSU banks to help them meet the 25% public shareholding requirement mandated under the MPS norms. This regulatory move is intended to reduce government ownership and increase public participation in state-owned banks.

While the fundraising efforts aim to enhance governance and compliance, the immediate impact on stock prices has been negative, as investors react to the dilution of their holdings. Additionally, broader market sentiment towards PSU banks has weakened, exacerbating the ongoing correction.

• ₹2,000 crore capital infusion to ensure compliance with public shareholding norms.

• Stock dilution concerns lead to investor caution and selling pressure.

• PSU banks face increased regulatory scrutiny and governance reforms.

Q4FY25 Earnings Outlook: Modest Growth with Stable Asset Quality

Brokerage firm Motilal Oswal anticipates that PSU banks will report modest earnings growth of 4.5% year-on-year (YoY) for Q4FY25, driven by a slight dip in net interest margins (NIMs), controlled operating expenses, and improved treasury income due to falling bond yields.

The brokerage projects that net interest income (NII) will rise by 2.8% YoY, although NIMs are expected to remain under pressure. However, controlled expenses and additional gains from treasury operations could offset margin pressures, leading to stable profitability for PSU banks.

On the asset quality front, Motilal Oswal expects stability, citing a potential reduction in stressed assets. While Q3FY25 saw an increase in the Special Mention Accounts (SMA) pool for some banks, analysts believe that recoveries will prevent major slippages. Additionally, revised norms for the sale of government-guaranteed security receipts (SRs) could unlock excess provisions, providing financial flexibility for PSU banks.

• Q4FY25 earnings expected to grow 4.5% YoY despite margin pressure.

• Treasury income likely to improve, driven by declining bond yields.

• Asset quality stable, with lower risk of slippages from stressed accounts.

Central Bank of India’s Q3FY25 Performance Shows Profit Growth

Despite the ongoing stock market weakness, Central Bank of India’s financial results for Q3FY25 remained robust. The bank reported a 33.58% jump in standalone net profit, reaching ₹958.93 crore, compared to ₹717.86 crore in Q3FY24.

Total income increased 6.56% YoY to ₹9,738.64 crore, up from ₹9,138.93 crore in the year-ago period. This growth was supported by steady loan disbursements and controlled expenses, even as the bank navigated challenging market conditions.

While recent market developments have impacted investor sentiment, the bank’s strong quarterly earnings highlight its resilience in the face of external pressures. With stable asset quality and sustained profitability, the bank remains financially positioned to recover once market sentiment stabilizes.

• Net profit jumped 33.58% YoY to ₹958.93 crore in Q3FY25.

• Total income grew 6.56% YoY to ₹9,738.64 crore.

• Strong earnings performance despite weak stock market sentiment.