Corp Bank net plummets 96%

Provisions for bad loans, depreciation on investments, high deposit cost stump Corporation Bank

Mangalore-headquartered public sector lender Corporation Bank reported a 96 per cent drop in net profit to Rs 15 crore for the quarter ending September 30, compared to the corresponding quarter the previous year, as provisions for bad loans, depreciation on investments, increase in cost of deposits and sharp increase in expenses hit the bank.

All these factors combined to hit the bank, even as it struggled to post a 17 per cent growth in total income to Rs 4,773 crore, riding on a 18.5 per cent increase in interest income at Rs 4,433 crore.

The bank was forced to set aside as much as Rs 700 crore during the quarter, up 2.5 times, as net non-performing assets almost doubled to Rs 2,668 crore during the quarter even, as it faced a Rs 250 crore depreciation on its investments.

The bank took in deposits at a high cost and had to expend an almost 20 per cent increase in interest outflow as it touched a good Rs 3,524 crore.  Besides, employees’ costs, which soared by 42 per cent to Rs 290 crore, took the total expenses to as much as Rs 4,109 crore, up 21 per cent, as it opened up as much as 66 branches so far during the year.

The management of bank explaining the depreciation on its investments said that as per RBI's recent statement, they have transferred SLR (statutory liquidity ratio) securities with a book value of Rs 9215 crore from AFS (available for sale) and HFT (held for trading) categories to HTM (held to maturity) and recognised loss of Rs 120.82 crore on such transfter during the quarter.  SLR refers to the amount that the commercial banks require to maintain in the form of gold or government approved securities before providing credit to the customers.

"The recent circular by RBI which was issued during late August, further gave banks the option of distributing the net depreciation on the entire AFS and HFT portfolios on each of the valuation dates in the current financial year in equal instalment during Fy14. Accordingly, we have charged Rs 151.53 crore towards investment depreciation during the quarter and a total provision of Rs 250 crore is held by us against net depreciation of Rs 553 crore by end of September 2013," the bank's management noted.

The stock of Corporation Bank was flat and closed at Rs 300.75 on NSE on Monday.