Central Bank of India Stock Hits 18-Month Low: Should Investors Be Worried?
Shares of Central Bank of India have been in a free fall, hitting an 18-month low of ₹36.86 on April 2, 2025. This marks a staggering 52% decline from its February 2024 peak of ₹77. The stock has extended its losing streak for three consecutive sessions, plunging 11% on April 2 alone, contributing to a three-day cumulative fall of 16%.
What’s Behind the Sharp Fall?
The stock’s recent downfall can be attributed to a Qualified Institutional Placement (QIP) issue, where the bank issued shares to institutional buyers. This move was part of a broader effort by four PSU banks—Central Bank of India, Punjab and Sind Bank, UCO Bank, and Indian Overseas Bank—to reduce government shareholding in compliance with the Minimum Public Shareholding (MPS) norms.
The government currently owns 89.3% of the Central Bank of India, with an additional 3.16% stake held by Life Insurance Corporation (LIC). Meanwhile, foreign institutional investors (FIIs) own just 1.3%, and general shareholders hold 3.6% as of Q3 FY25.
Despite the government’s plan to inject ₹2,000 crore into five PSU banks, investors remain cautious. The overhang of high government ownership and continuous dilution of stakes through QIPs has kept sentiment weak.
How Have PSU Banks Performed Recently?
According to Motilal Oswal, PSU banks are expected to report modest earnings growth in Q4 FY25, with a 4.5% year-on-year (YoY) increase. However, the net interest margins (NIMs) remain under pressure, impacting profitability.
Net interest income (NII) is expected to grow at a moderate 2.8% YoY, while operating expenses are projected to stay in control. Analysts believe that treasury performance will improve due to falling bond yields, despite the ongoing volatility in equity markets.
On the asset quality front, PSU banks are expected to remain stable, although the Special Mention Accounts (SMA) pool witnessed a rise in Q3 FY25. However, analysts believe these accounts will recover without causing major slippages.
Financial Performance of Central Bank of India
Despite the stock’s poor performance, Central Bank of India has posted strong financial results:
| Financial Metric | Q3 FY25 | Q3 FY24 | YoY Growth |
|---|---|---|---|
| Net Profit | ₹958.93 crore | ₹717.86 crore | +33.58% |
| Total Income | ₹9,738.64 crore | ₹9,138.93 crore | +6.56% |
| Net Interest Margin (NIM) | Under Pressure | – | – |
| CAGR (FY25-FY27) | Expected 9% | – | – |
Stock Outlook: What Should Investors Do?
While the fundamentals of the bank remain strong, the sentiment around PSU banks remains weak due to continuous government stake dilution and regulatory overhangs.
For long-term investors, the stock may offer an attractive entry point if the earnings continue to improve, and the government reduces its stake further to enhance market confidence.
However, in the short term, volatility remains high, and further downside risks cannot be ruled out. Investors must closely monitor Q4 FY25 results and future government moves before making a decision.
Q&A: Quick Takeaways from the Article
1. Why has Central Bank of India’s stock fallen recently?
The stock has dropped due to a 52% decline from its February 2024 peak, triggered by a QIP issue that diluted shareholder value and weak sentiment around PSU banks.
2. How much has the stock fallen in recent days?
The stock has fallen 16% over three sessions, including an 11% drop on April 2.
3. What is a QIP, and how does it affect the stock price?
A Qualified Institutional Placement (QIP) allows companies to raise funds from institutional investors. While it helps in capital raising, it increases the number of shares in circulation, leading to a drop in stock price due to dilution.
4. What is the current ownership structure of Central Bank of India?
- Government: 89.3%
- Life Insurance Corporation (LIC): 3.16%
- Foreign Institutional Investors (FIIs): 1.3%
- General Public: 3.6%
5. Is the bank still profitable despite the stock decline?
Yes, the bank’s net profit surged by 33.58% YoY in Q3 FY25, reaching ₹958.93 crore.
6. What should investors do now?
- Long-term investors: May consider buying if earnings continue to improve.
- Short-term traders: Should be cautious due to high volatility.
Would you consider investing in Central Bank of India at these levels? Let us know your thoughts! 🚀
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.