 "Canara Bank alleges Rs 5 bn fraud by Kolkata-based R P Infosystems")
The decline in bad loan accounts, a sharp rise in cash recovery coupled with good growth in retail advances enabled public sector lender Canara Bank to post a surprise first-quarter net profit on Wednesday.
The Bengaluru-headquartered lender, which posted a huge loss of Rs 48.60 billion in the fourth quarter of last fiscal, recorded 11.51 per cent rise in its net profit at Rs 2.81 billion in the first quarter ended June 30, 2018.
Asset quality also improved during this period with its gross NPA falling to 11.05 per cent, 79 basis point lower than 11.84 per cent reported in the preceding quarter. Similarly, net NPA also fell to 6.91 per cent in Q1 of FY19, which was an improvement of 57 basis points sequentially.
Recovery from bad loan accounts supplemented the bottom line of the bank. In first quarter, cash recovery was at Rs 35.37 billion, which included Rs 20.80 billion of recovery from accounts that were referred to National Company Law Tribunal (NCLT) for resolution.
Canara Bank has a total exposure of Rs 150 billion to bad loan accounts that were referred to NCLT. "We have recovered around Rs 20.80 billion from the resolution of two bad loan accounts. There are 6 to7 accounts which are at the final stage of resolution. So, we hope to recover a good amount of bad loan this fiscal," said Rakesh Sharma, Managing Director and Chief Executive Officer of Canara Bank.
According to the lender, accretion in slippages had also fallen in the first quarter. "After challenging times, we saw our bad loan ratio coming down with a good amount of cash recovery. In coming quarters, our net NPA should come down below 6 per cent," Sharma added.
Bank's realignment of the loan portfolio with shifting of focus to retail segment had also paid good dividends in the first quarter.
Gross advances of the public sector lender grew by 12.67 per cent to Rs 3,862.53 billion, whereas its retail advances rose 36 per cent to Rs 828.77 billion.
Similarly, its deposits grew by 9.75 per cent to Rs 5,332 billion in the first quarter with a CASA (current account, savings account) ratio of 32.43 per cent.
"Our realignment of loan book with a clear focus on retail segment has started to pay up. We also see green shoots in the corporate loan segment," Sharma said.
During the quarter, provisions inched up 17 per cent to Rs 25.82 billion from Rs 22.03 billion in the corresponding quarter last year. Provision coverage ratio improved to 60.69 per cent from 54.52 per cent a year earlier.
On the capital adequacy front, the bank said that its board would soon take a decision on instruments through which it could raise funds. Earlier, it had received the board approval to raise Rs 70 billion in this fiscal. However, capital adequacy ratio of the bank remained healthy at 13 per cent by the end of June quarter.
