Stung by rising levels of non-performing assets (NPAs) in its portfolio, Canara Bank, on Saturday, reported a net profit of Rs.792 crore in the first quarter ending June 30, just 2.2 per cent higher than in the year-ago quarter.
Net NPAs as a proportion of the bank’s assets increased by 88 basis points (one hundredth of a percentage point), to 2.48 per cent at the end of the last quarter. “Our profitability has been affected by the higher provisions we had to make for the higher levels of NPAs in our books,” admitted Chairman and Managing Director R. K. Dubey.
Provisions and contingencies shot up by a whopping 119 per cent to Rs.916.19 crore at the end of the April-June quarter from Rs.418.53 crore in the year-ago quarter. The bank made a provision of Rs.1,104 crore during the quarter, 79 per cent higher than what it provided for a year earlier. In absolute terms, the bank’s net NPAs increased to Rs.6,209 crore at the end of the latest quarter from Rs.3,756 crore a year ago, an increase of 65 per cent.
The non performing assets from the large corporate segment was the single biggest source of problems for Canara Bank. The NPAs from this segment more than doubled to Rs.2,141 crore at the end of the last quarter.
Net interest income increased by 8 per cent to Rs.1,991 crore in the latest quarter from Rs. 1,844 crore in the first quarter of 2012-13 . The bank’s net interest margin, which is a measure of the spread between the interest it charges on advances and the interest it spends on deposits, also remain flat at 2.2 per cent.
The saving grace was a 79 per cent increase in non-interest income through treasury operations — from Rs.693 crore in the year-ago quarter to Rs.1,238 crore in the April-June, 2013, quarter.
Attributing the rising volumes of NPAs on the ‘sluggish economic environment,’ Mr. Dubey said the ‘sharp reduction’ in bulk deposits and the ‘focus’ on CASA (current account and savings account) deposits had mitigated the problem to some extent. Referring to the flat margins, he said, “Our base rate for agriculture, SMEs and retail customers is generally lower than our peers.” He said the bank was not making ‘a long-term commitment’ to keep interest rates at current levels and would consider revising them if “the economic environment continues to remain stressed.”
He said the bank was targeting a net interest margin of 2.4-2.6 per cent by March, 2014. “Our focus in the remaining part of the year is on getting CASA deposits, ensuring recoveries of impaired assets and to increase fee-based incomes,” he said.