Canara Bank profit up 6.7% at Rs775 cr

Bangalore-based public sector lender Canara Bank on Tuesday reported a 6.7 per cent rise in net profit to Rs775 crore for the quarter ended June 30, against Rs726 crore in the first quarter last financial year.

The bank’s total income of the bank showed a year-on-year increase of 18.9 per cent to Rs9,165 crore for the quarter ended June.

The operating profit for the quarter stood at Rs1,394 crore, a growth of 9.7 per cent over the corresponding quarter last year.

“The net profit growth has been lower at less than seven per cent this quarter mainly because of sluggish growth in the economy. Our net interest income grew by just four per cent at Rs1,844 crore during the first quarter,” S Raman, chairman and managing director of Canara Bank, said.

The bank’s provisions were higher at Rs477 crore towards non-performing assets as against Rs285 crore in the corresponding quarter last year, an increase of 67 per cent. The bank’s non-interest income has gone up by 26 per cent at Rs693 crore in the quarter.

Cost of deposits rose by 84 basis points to 7.89 per cent in the June quarter as against 7.05 per cent in the June quarter last year. Its yield on advances grew by just 62 basis points at 11.12 per cent, as against 10.50 per cent in the first quarter of last year.

As part of the derisking strategy, the bank has reduced its short-term corporate loan portfolio by Rs22,000 crore in the last few months. Currently, the short-term corporate loan portfolio stands at Rs23,000 crore. “As a result of this reduction, our top line does not grow aggressively, but it will help us improve our net interest margins over the long term basis,” Raman said.

The capital adequacy ratio has marginally declined to 13.22 per cent compared with 13.37 per cent in the year-ago period. Tier-I capital ratio rose to 10.06 per cent as against 9.59 per cent in June 2011. The Tier-II capital stood at 3.16 per cent.

“There is enough headroom available under both Tier-I and Tier-II options to raise capital to support business growth momentum. However, we are not looking at any fresh capital at this stage,” Raman said.

The return on assets has declined to 0.8 per cent as against 0.9 per cent in June last year. The net non-performing assets ratio has increased to 1.5 per cent as against 1.3 per cent in the corresponding quarter last year. The bank made a cash recovery of Rs594 crore in the first quarter.