Central Bank of India may merge housing arm

Central Bank of India (CBI) is actively considering a move to consolidate its housing finance business by a possible merger of its existing housing finance subsidiary with itself.

When asked Albert Tauro, executive director of CBI told Business Standard said it would be difficult for him to comment on possible merger of housing finance company with the bank as CBI is coming up with an IPO.

However, he said, "At an appropriate time we will take decision in this regard".

Tauro was quick to cite examples of some of the recent mergers of housing finance subsidiaries of various public sector banks with the parent organisation.

"There are banks like PNB which due to the business compulsion had merged its housing finance arm with itself", comments Tauro.

In 1991, CBI set up a housing finance subsidiary - Cent Bank Home Finance Ltd, wherein Unit Trust of India (UTI) holds 16 per cent, HUDCO has stake of 8.5 per cent, National Housing Bank has 16 per cent and CBI holds 59 perc cent.

In the last 17 years of its existence the housing finance subsidiary of CBI was able to spread its activities only in Maharashtra and in some parts of Madhya Pradesh.

On slow and stagnant business situation of Cent Bank Home Finance Ltd, Tauro admitted that the subsidiary did not achieve much compared to other housing finance companies since its inception.

According to Tauro intense competition in housing finance sector was one of the factors which contributed significantly towards the slow growth of the CBI's housing subsidiary.

Cent Bank Home Finance Ltd, has a business portfolio of Rs 285 crore with a capital base of Rs 40 crore. For the financial year ended March 2007, the subsidiary made profit of Rs 5.3 crore. The bank officials claim that the subsidiary never made losses except in the FY 2004-05.

The bank is coming up with its debut public issue with 8 crore equity shares at the price band of Rs 85-102. Post issue, the shareholding of the government of India in the Bank will come down to 80.20 per cent.

The issue proceeds will be utilised to augment the capital base of the bank to meet the future capital requirements arising out of the implementation of the Basel II standards and the growth in assets.

The Bank's total assets stood at Rs 92,522 crore, total deposit at Rs 82,776 crore and advances at Rs 53,630 crore.

For the financial year ended March 2007, the net non performing assets (NPA) stood at Rs 878 crore.