Public sector bank, Dena Bank, is looking to grow its fee income by 25-30 per cent in the current fiscal. This will take care of pressures on margins due to rising interest rates and expenses such as employee costs, said Mr D. L. Rawal, Chairman and Managing Director.
One of the ways to increase fee income could be by offering products tailored to the needs of customers such as current accountholders. Increasing the income from sale of third party products and loan syndication would be other avenues for non-interest income, Mr Rawal said.
For the quarter ended March 31, 2011, the bank's net profit increased by 14.5 per cent to Rs 157 crore, against Rs 137 crore in the corresponding year ago period.
A marginal growth in non-interest income (due to lower profits from sale of securities and recovery from written off accounts) and higher provisions for non-performing assets impacted profits to some extent.
For the fourth quarter, the NPA provision increased to Rs 121 crore (Rs 37 crore). The provision coverage ratio was at over 74 per cent.
Profit from sale of securities declined to less than Rs 1 crore from Rs 8 crore, while recovery from written off assets fell to Rs 62 crore, from Rs 70 crore.
“The last quarter was difficult also due to the provision for employee pension which we had to charge to the profit and loss account,” Mr Rawal said.
The bank made a total provision of Rs 198 crore towards pension funds for both serving and retired employees in the fourth quarter.
Cost of deposits increased to 6.05 per cent (5.93 per cent).
For the full year 2010-11, the bank posted a net profit of Rs 612 crore, 20 per cent higher than Rs 511 crore in the previous year.
For the current fiscal, Dena Bank is looking at a growth of 22 per cent in credit, 18-20 per cent in deposits and 25 per cent in low cost current and savings accounts. It is targeting NIM of around 3 per cent, Mr Rawal said.
The bank will raise Rs 400 crore by way of Tier-I equity capital by issuing preference shares to the Government.
Shares of Dena Bank closed at Rs 104.2, down 3.43 per cent, from the previous close of Rs 107.9, on the BSE, on Friday.