Canara Bank announced, on Thursday, that it made a net profit of Rs.3,283 crore in 2011-12, a decline of 23 per cent over the previous year. Referring to the fact that the growth of deposits and advances during the past year was in low double-digits, Chairman and Managing Director S. Raman said this reflected the emphasis on “business consolidation, rather than growth.”
Mr. Raman said the bank aimed to get its portfolio of non-performing assets (NPA) “under control.”
While gross NPAs as a percentage of all assets declined from 1.81 to 1.73, net NPAs fell from 1.49 per cent to 1.46 per cent during the year. He said the overall slackness in the economic environment, and its impact on particular sectors such as textiles, steel, mining and infrastructure, were responsible for the slower growth of the bank's business.
Total provisions amounted to Rs.2,660 crore, of which NPAs accounted for Rs.1,294 crore.
Canara Bank, Mr. Raman said, had adopted a two-pronged strategy to counter this.
First, the bank had decided to reduce its “concentration of exposure” to sectors such as infrastructure, particularly to the power sector.
“We are not going to shun infrastructure, but we will have tighter norms,” Mr. Raman said.
A senior bank official told The Hindu that the bank realised that smaller players in the power sector were particularly vulnerable to the “problem of coal supplies.”
“Although we have no NPAs in the power sector, we have consciously decided to play it safe,” he said.
Second, the bank had decided to reduce its dependence on short-term lending to corporate customers. In, fact, the bank reduced such loans by Rs.10,000 crore last year, Mr. Raman said.
“We consciously attacked the question of asset quality on our portfolio,” he said.
The bank had a net interest margin of 2.50 per cent in 2012, as compared to 3.12 per cent, a year earlier. “We are at comfortable level (of NIM), and we would be happy to have it at 2.75 during the current year,” he said.
Mr. Raman said competitive market pressures and the slack credit offtake did not allow the bank to pass on the burden of higher interest rates (caused by the hikes in the central bank's repo rate during the year) onto its customers. This resulted in higher costs, reflected in the cost-income ratio increasing from 41.98 per cent in 2010-11 to 44.02 per cent 2011-12.
Mr. Raman contended that the bank was in a “singularly distinct position” to meet the Basle-III norms. It is better placed to access the capital market to shore up its capital base, Mr. Raman explained.
The board has maintained the dividend at Rs.11 per share for 2011-12.
