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G. R. N. Somashekar

Business target raised: Mr A.C. Mahajan, CMD, Canara Bank, at a press conference in Bangalore on Monday. –

Our Bureau

Bangalore, Oct. 20 Canara Bank has ruled out any immediate cut in the benchmark prime lending rate (BPLR) after the Reserve Bank of India cut repurchase rate to 8 per cent.

Speaking to reporters here on Monday, the Chairman and Managing Director, Mr A.C. Mahajan, said, “We will wait for the RBI’s Credit Policy announcement before reducing the rate.” He said though the signal was for lower lending rates, the bank was not positioned to cut lending rates. The inability was on account of the high cost of deposits. Canara Bank currently is raising deposits at a peak cost of about 10.5 per cent, he added.

Yet, it managed to contain its weighted average cost of working to 6.51 per cent in the second quarter of this financial year. During the corresponding period of the last financial year, the bank’s average costs were 6.71 per cent.

Mr Mahajan explained that cost was largely contained by the component of Current and Savings Account depositswith the bank. CASA comprised 20 per cent of the bank’s deposits. Also the bank was holding back intake of bulk deposits. Outstanding bulk deposits in Q2 were Rs 44,000 crore, unchanged from the corresponding period of the last year.

The bank was able to improve its average yield on advances to 10.5 per cent this quarter, as against 9.13 per cent during the corresponding period of last year. As a result, the net interest margin improved to 2.7 per cent or up 28 basis points over the corresponding period of last year.

For the second quarter of the current financial year Canara Bank reported a net profit of Rs 529 .43 crore, up 32 per cent over the previous year. The improved net profit was largely contributed by operating income. Interest income rose 18 per cent to Rs 4,109.20 crore. What also supported the bank’s income was the other income. Other income that included profits from trading in securities was Rs 338.77 crore.

The improved income prompted Canara Bank to raise its business target for the current year to Rs 3.15 lakh crore, from the original estimate of Rs 3 lakh crore.

More Stories on : Financial Performance | Public Sector Banks

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