Hit by narrowing interest spreads and worsening asset quality, which reflected in the rising level of non-performing assets, Canara Bank, on Thursday, reported a net profit of Rs.2,872 crores in 2012-13, a 12.52 per cent drop as compared to the previous year. The bank’s net interest margin — the difference between interest earned from advances and interest income paid by the bank — shrunk by 11 basis points during the year.
The bank reported operating profits of Rs.5,890 crores, marginally lower than what it reported in the previous year. The impact of the narrowing spreads was reflected in the fact that while interest income increased by 10 per cent from Rs.30,851 crore to Rs.34,078 crore, interest expenses rose by more than 13 per cent during the year.
Provisions for NPAs increased 44 per cent during the year — from Rs.1,294 crore to Rs.1,861 crore, even as provisions for “restructured” assets increased by 52 per cent to Rs.361 crore at the end of last year.
However, a senior official of the bank pointed out that the decline in the proportion of gross and net NPAs (as a proportion of total assets) indicated that the bank was “better placed to bring overall NPAs under control during the current year.”
The proportion of net NPAs had declined to 2.18 per cent at the end of the last year, from 2.35 per cent at the end of 2011-12, he pointed out.
However, despite the higher quantum of provisions made last year, the provision coverage ratio at the end of March 2013 slipped to 61.35 per cent from 67.6 per cent in March 2012, which is well below the central bank-mandated minimum of 70 per cent. The bank’s exposure to the infrastructure sector (almost Rs.47,000 crore), widely held by bankers to be the main contributor to rising NPA levels, accounted for almost 20 per cent of its total advances in 2012-13. Within this segment, exposure to the power sector amounted to more than Rs.30,000 crore, of which, more than Rs.21,000 crore was to the state electricity boards.
Significantly, the bank’s exposure to the aviation sector, including advances made to Kingfisher Airlines, declined marginally during the year — from Rs.2,286 crore in 2011-12 to Rs.1,907 crore in 2012-13.
Aided by a substantial tax credit during 2012-13, Syndicate Bank on Thursday reported a net profit of Rs.2,004 crore, 52.6 per cent higher than in the previous year. The bank took a tax credit of Rs.804.54 crore during the year, including Rs.573 crore on account of minimum alternate tax (MAT), which, along with lower provisioning for non-performing assets (NPA), boosted the bottom line.
The remaining portion of the tax credit was on account of “deferred tax assets,” according to a senior official of the bank.
Interest income rose 12.1 per cent during the year, amounting to Rs.17,121 crore. However, net interest income grew only by 7.3 per cent to Rs.5,454 crore, pulled down by the decline in the bank’s net interest margin from 3.43 per cent to 3.19 per cent.
The bank reported a net profit of Rs.592 crore during the fourth quarter of 2012-13, an increase of 92 per cent over the corresponding quarter of the previous year.
Profit was boosted by a tax credit amounting to Rs.104 crore during the quarter.
Although the Chairman and Managing Director M. G. Sanghvi downplayed the significance of the tax credit to the bank’s bottom line in the current year, senior bank officials explained that the bank was likely to emerge out of the MAT regime during the current year.
The board recommended a dividend of Rs.6.7 per share for the year as compared to Rs.3.8 per share in 2011-12.