The Hindu Business Line : Vijaya Bank posts 9% growth in net profit

Mr Prakash P. Mallya (left), Chairman and MD, Vijaya Bank, with Mr T. Valliappan, Executive Director, at a press conference to announce the bank’s annual financial results in Bangalore on Saturday.

Our Bureau

Bangalore, April 26 Public sector Vijaya Bank is on track for meeting its September deadline for compliance with Basel II guidelines.

Accordingly, the bank reported a 9 per cent growth in net profit for the financial year 2007-08 at Rs 361.26 crore and high provisions for depreciation on investments. The bank made a provision of Rs 272.12 crore for depreciation of its marked to market investments double the previous financial year’s figures. The bank also reported a dividend of 20 per cent.

The Vijaya Bank Chairman and Managing Director, Mr Prakash P Mallya, told newspersons: “We were prepared to report higher profits but for the large provisions for depreciation of assets.” Exclusive of the provisions, the bank had a net profit of Rs 478 crore for the year.

The provisions were made in view of the sharp increase in the average yield to maturity (YTM) on investments between March 15 and March 31. During the period, the YTM firmed from 7.62 per cent to 7.94 per cent, resulting in the large provisions. In fact, a bulk of the cash recovery of Rs 282 crore appeared to have gone into making the provisions. But Mr Mallya said the large provisions were an advantage and would help the bank when yields soften during the course of the current year. “This will help our capitalisation when we migrate to Basel II in September,” he added.

Vijaya Bank’s net profit was supported by the big improved yield on advances. The average yield on advances was 10.38 per cent, up 118 basis points over the last financial year. During the same period, the cost of deposits was 7.13 per cent.

For the current year, the bank is targeting a further improvement in its numbers. Mr Mallya said, “We hope to top Rs 500 crore in net profit this year.”

Vijaya Bank has set a business target of Rs 1 lakh crore and improve its credit to deposits ratio of over 70 per cent, he added. The focus areas for credit offtake would be the farm and small and medium enterprise sectors.

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