Q&A: S Raman, CMD, Canara Bank

'We expect sound and steady growth in core earnings'

Canara Bank Chairman and Managing Director S Raman believes sound and steady growth in core earnings and greater profitability will be the bank’s key focus areas in 2011. In a freewheeling chat with Debasis Mohapatra, he discussed about the challenges and priorities before the bank in 2011. Edited excerpts:

What will be the bank’s priority areas in 2011?
Our priority will be to continue the growth momentum in core earnings, along with the overall business, in this calendar year. Profitability is another area on which the bank will focus. The overall branch addition will be in the range of 200, along with two overseas branches.

 

Presently, overseas branches contribute around 3.9 per cent of the total revenue and we aim to increase it to five per cent by the end of this year. Also, a lot of young people are being recruited to give dynamism to our operation. The underlying philosophy is to have sound and steady growth with basics intact.

What are the factors that will work against the bank during this year?
Managing interest rates will be one of the challenges. As interest rates go up, we have to manage our cost of funds and see that how much can be passed to customers. One way to minimise the cost of funds is to grow our current account, savings account (CASA) portfolio. Our CASA ratio was at 30.5 per cent at the end of December and we are hopeful of achieving 32 per cent CASA in 2011.

What is your outlook on net interest margin (NIM) in the wake up rising cost of funds?
We aim to end this financial year with a NIM of 3.2 per cent. Going ahead, there may be some kind of pressure on NIM, as the cost of deposits goes up due to possible rate hikes by the central bank. However, maintaining a NIM of 3.2 per cent is not difficult, as the number is not in the higher bracket of four and above.

How are your subsidiaries doing? What is your game plan?
Canara Bank has a history of managing its subsidiaries quite well and all our subsidiaries have registered sound growth. Our life insurance business with Oriental Bank of Commerce and HSBC is one of the best performing insurance business in the country.

Our asset management company in association with Robeco, is also performing well, along with our venture capital (VC) subsidiary. Also, Canbank Factors is showing good growth from the beginning. Subsidiaries are the key strength areas of the bank, which give a lot of dividend to our overall growth figures.

Is there any plan to spin off your VC subsidiary, as the central bank recently increased the cost of holding third-party funds?
There is no such plan. We are comfortable in holding the VC fund , which is performing reasonably well. We will change the present structure when there is a need.

The bank recovered around Rs 1,200 crore in the first nine months of this financial year. Will you offload some of your non-performing assets (NPAs) in the fourth quarter?
We find no reason to offload our NPAs as of now. We are very good at recovering our NPAs, as indicated by the fact that around Rs 1,200 crore have been recovered in the first nine months. Further, we are of the opinion that any distressed asset sale doesn’t give right valuation. So, we are not looking at offloading NPAs in the near-term.