The Hindu Business Line : Cash recovery propels Canara Bank net

Bangalore, April 26 Public sector Canara Bank has begun exploring foreign joint venture opportunities for its nine subsidiary companies. This follows the successful tie up with Robeco of Netherlands and HSBC for its asset management and life insurance business, respectively.

The insurance business is expected to begin operations shortly. Speaking to journalists here on Saturday, the Canara Bank Chairman and Managing Director, Mr M.B.N. Rao, said, “We would like to unlock value in each of these subsidiaries.” The subsidiaries include Canbank Factoring Ltd.

He said the bank had seamlessly migrated to the Basel II capital adequacy regime. The bank now intended putting in place advanced risk management architecture and for the purpose, plans to move into the advanced indicator approach, he said.

Recommends 80%

The bank reported a net profit of Rs 1,565 crore or 10.15 per cent over the last financial year, and has recommended a dividend of 80 per cent to its shareholders.

The bottom line growth was partly achieved by a cash recovery of Rs 1,030 crore this year. The bank also managed to contain its provisions for investment depreciation. The bank’s provisions were at Rs 1,054.37 crore, down from the previous financial year’s Rs 1,241.66 crore.

Mr Rao said the depreciation was contained largely by reducing the tenure of its marked-to-market (MTM) investment portfolios. For the last financial year, the average tenure of its MTM investments was brought down to 1.29 years, down from the previous year’s 1.40 per cent.

What also helped the bottom line was the focus on low cost deposits and shift to high yield assets. Canara Bank’s current and saving account deposits comprised about 32.4 per cent of its gross deposits. During the year, the bank also shed about 24 per cent of its preferential rate deposits (bulk deposits).

On the assets side, he said, the bank pruned their low-yield loans, as part of the portfolio rebalancing. Despite the portfolio rebalancing, the bank pushed up its advances to Rs 1.07 lakh crore, or an increase of Rs 8,732 crore over the corresponding period of the last financial year.

Mr Rao said that the steps would help the bank push up its net interest margins (NIM) by another 50 basis points during the current year. NIM in FY08 was 2.42 per cent. The increase would also be supported by the aggressive advances target for the current financial year. This year, Canara Bank is targeting advances of at least Rs 1.25 lakh crore.

Equity option

Asked whether the growth would require capital support, he said. “We have the room. If the markets permit, we are not averse to raising equity resources.” Currently, public shareholding is only 26.83 per cent in the bank’s paid-up equity of Rs 410 crore.

More Stories on : Financial Performance | Public Sector Banks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
IDBI Bank Q4 net surges 15% on higher interest income

Cash recovery propels Canara Bank net

Treasury profits boost Corporation Bank net

Vijaya Bank posts 9% growth in net profit