Corporation Bank reported a marginal increase in net profit at Rs 351 crore during April-June 2011, against Rs 334 crore recorded in the corresponding previous quarter.

Profit was flat on account of the higher interest outgo on deposits and provision for investment depreciation, said Mr Ramnath Pradeep, Chairman and Managing Director, Corporation Bank.

Though the yield on advances has increased, the higher cost of deposits has led to a contraction in margins.

“CASA is low and we are trying to improve it. We are trying to replace high-cost deposits with CASA in order to protect our NIMs,'' Mr Pradeep said.

Corporation Bank's ratio of low-cost current and savings accounts (CASA) at 24 per cent is one of the lowest among banks.

During this financial year the bank will target borrowers from mid-sized companies as the yields from this segment are higher, he added.

Though total provisions were lower at Rs 224 crore (Rs 286 crore), the provision on account of investment depreciation surged to Rs 71 crore (Rs 8 crore).

In the quarter under review, the bank did not roll over short-term advances of about Rs 12,000 crore, which were priced at the lower end, said Mr Pradeep.

Going ahead, the bank will look to re-price its advances, but deposit rates will depend on the market, he added.

The bank has set a target of 25 per cent growth in advances and 33 per cent growth in deposits in the current financial year. It has sanctions of about Rs 22,000 crore in the pipeline. “We are banking on a substantial drawdown of these sanctions to achieve our credit target for the current year,” Mr Pradeep said.

The bank has an exposure of Rs 2,955 crore in commercial real estate and Rs 13,780 crore in infrastructure. Of the infrastructure loans, about Rs 7,200 crore is channelled into power projects. “Our exposure to power is substantial and we are slowing down loans in this segment,'' he said.

The shares of Corporation Bank closed at Rs 514, down 1.01 per cent on the BSE on Thursday.

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