The Hindu Business Line : Other income doubles; Canara Bank net up 26%

Market-related approach: (From left) Mr Rawal, ED, Canara Bank; Mr M. B. N. Rao, Chairman and MD; and Mr G S Vedi, ED; at a press conference in Bangalore on Wednesday. -

Our Bureau

Bangalore, Jan. 23 Canara Bank has engaged the Boston Consulting Group (BCG) for designing and implementing a new corporate business strategy.

Speaking to media persons on the Q3 results, Canara Bank’s Chairman and Managing Director, Mr M.B.N. Rao, said: “BCG will help us bring about changes in business processes, systems, and adopt a market-related approach.”

The bank reported a net profit of Rs 459 crore for the third quarter of the current financial year, a 26.4 per cent increase over the corresponding period of the last financial year. The increase was helped by a whopping 92 per cent increase in other income.

Other income, which included profits from treasury operations, rose to Rs 546.44 crore in Q3 (Rs 284.03 crore). Canara Bank has an investment book of Rs 50,443 crore, of which at least Rs 21,000 crore is marked to market. In addition, the bank made a cash recovery of Rs 670 crore during the period that helped buoy its bottom line.

Income & expenditure

The gross income in Q3 rose to Rs 4,096.60 crore, up from Rs 3,245.39 crore. The increase was driven by interest income that rose to Rs 3,550.16 crore, up from Rs 2,961.36 crore. This was partly on account of some asset re-pricing that took place during the course of the year.

Gross expenditure in Q3 was Rs 3,338.77 crore, up from Rs 2,559.65 crore. Interest expenditure rose to Rs 2,615.80 crore, up from Rs 1,922.78 crore. The absolute increase was largely on increased deposits, though interest costs were pruned.

Current and savings deposits grew by 27 per cent over the corresponding period of last year. As a result, the cost of working funds dropped to 6.12 per cent in Q3, from 6.25 per cent over the corresponding quarter’s figure of 6.25 per cent. This drop was also achieved by exiting from some high costs deposits, Mr Rao said.

“We have taken a conscious decision not to pay more than 9 per cent for deposits,” he said. The move helped the bank’s net interest income to improve to Rs 934 crore in Q3, from Rs 787 crore.

Interest margin

However, the net interest margin (NIM) was under pressure. NIM, the difference between interest earned and interest paid out, was 2.41 per cent in Q3 this year (2.43 per cent), or 5 basis points over the sequential quarter.

Mr Rao said that the bank expected to sustain its asset growth of 20 per cent during the year despite containing its retail portfolio to just 17.35 per cent of its net credit. Capital requirement for sustaining the growth was still being assessed.

He said: “We have considerable leeway for raising tier one and tier two capital. We are still evaluating the options.” But the bank already has a capital to risk weighted asset ratio of 13.66 per cent. This ratio was after factoring in operational risk, essential for banks with international operations.

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