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Decline in margins weighs on profits

PLATINUM JUBILEE FETE: Mr Prakash P. Mallya, CMD, Vijaya Bank, at a press conference in Kochi on Thursday. - K. K. Mustafah

Kochi , June 15

The public sector Vijaya Bank has initiated steps to make its presence in the overseas by opening branches in West Asia, China and Hong Kong.

The bank had already put applications before the Government as well as the RBI seeking permission to open branches abroad, Mr Prakash P. Mallya, Chairman and Managing Director of the bank, said at a press meet here on Thursday. The bank is hopeful of getting permission this year as part of the Platinum Jubilee celebrations of the bank, he added.

Mr Mallya, who was here to inaugurate the 11th centralised service branch, said the bank was targeting a business of Rs 60,000 crore with a net profit of Rs 350 crore in the current financial year.

Last year, the bank did done a business of Rs 45,000 crore. However, the business has not grown in volumes and the net profit for 2005-06 was at Rs 126 crore, down from Rs 180 crore registered in the previous year. The pressure on the bank's profitability is mainly on account of the decline in interest spread. Stiff competition among banks for credit expansion has resulted in the reduction in yield on advances from 9.34 per cent to 8.3 per cent, he said.

The bank, he said, had also taken steps to improve its visibility in Kerala by adding five more branches from the present 73 branches.

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