Canara Bank net drops 41% to Rs 478 cr

High provisions and contingencies dent bottomline

Canara Bank has posted a 40.7 per cent drop in net profit for the June quarter at Rs 478 crore, on higher provision for bad loans and a dip in the value of bonds. Net profit in the year-ago quarter was Rs 806 crore.

The public sector bank’s stock was down two per cent to Rs 303 a share in closing trades on the BSE. The bank’s net interest income (NII) grew 3.5 per cent to Rs 2,516 crore, compared with an NII of Rs 2,430 crore in the corresponding period last year.

On the other hand, net interest margin fell to 2.2 per cent from 2.30 per cent, year-on-year. ‘Other income’, which comprises fees, commissions and earnings from treasury, grew 8.4 per cent to Rs 1,112 crore, against Rs 1,026 crore a year ago.

The provisions and contingencies for the quarter rose 72.5 per cent to Rs 1,359 crore. compared with Rs 788 crore in the first quarter of FY15.

The bank’s bond portfolio was impacted by the rise in yields in the quarter under review. As a consequence, it had to set aside Rs 133 crore for erosion in the value of securities.

The provisions for non-performing assets (NPAs) grew to Rs 1,314 crore, from Rs 1,125 crore a year ago.

P S Rawat, executive director of Canara Bank, said the bank had decided to make provisions for certain NPAs in one quarter than spread over three quarters to clean up the balance sheet. “This will save us from any pressures in coming quarters,” he said.

While the bill for provisions grew for the bank, its asset quality was steady. Canara Bank’s gross performing assets stood at 3.98 per cent (Rs 13,080 crore) in June, compared with nearly 3.89 per cent (Rs 13,039 crore) in March. Gross NPAs were at 2.67 per cent (Rs 8,159 crore) in June 2014.

The bank did not sell NPAs to asset reconstruction companies in the first quarter. However, it would auction NPAs worth Rs 2,000 crore in asset value this year, Rawat said.

Canara Bank’s deposits rose 10 per cent to Rs 4.72 lakh crore. Credit grew seven per cent to Rs 3.24 lakh crore. Its outstanding exposure to state-owned power distribution companies was Rs 19,255 crore, out of which Rs 6,560 crore being restructured loans.

The bank’s capital adequacy ratio (Basel III) was 10.75 per cent with Tier-I of 8.28 per cent in June 2015, against 10.23 per cent with 7.39 per cent being Tier-I in June 2014.