Increased cover for bad loans and decline in trading profits brought down Canara Bank's net profit by 28 per cent, to Rs 725.85 crore for the April-June quarter , compared with Rs 1,013.37 crore in the corresponding period last year.
Provisioning for non-performing assets went up by Rs 285 crore on changed norms. The bank's trading profit dipped by Rs 300 crore due to rising yields on government securities .
“There was also a reversal of interest of Rs 210 crore due to slippages as we shifted to system-based NPA identification of up to Rs 2 lakh. This is a one-off occurrence,” Mr S. Raman, Chairman and Managing Director, Canara Bank, explained.
Without the additional provisioning and reversal of interest, the bank's net profit would have been Rs 1,521 crore, he pointed out. The bank's net interest income stood at Rs 1,793 crore (Rs 1,727.83 crore).
An automated NPA identification process also led to an increase in the bank's NPAs. The bank's gross NPAs grew to 1.67 per cent (1.46 per cent), while net NPAs stood at 1.34 per cent (1 per cent). “Though we were one of the last among public sector banks to go in for 100 per cent core banking solution, we went aggressively into system-driven NPA identification and recoveries. We made recoveries of Rs 750 crore in the NPA portfolio in the first quarter itself,” said Mr Raman. The total slippages were over Rs 1,300 crore, while system-driven NPAs were at about Rs 650 crore. The bank will shift its entire portfolio to system-driven NPA identification in the next two days, he added.
Due to the reversal in interest rates, the bank's net interest margin came down to 2.42 per cent. Mr Raman said he expected the NIM to increase during the course of this fiscal, and hoped to close the year with an NIM of 2.9 per cent. The bank's Current Account/Savings Account (CASA), at 26.5 per cent (of total deposits), however, remains a concern, he admitted. With the gap between savings rate interest and term deposit rates widening, it was difficult to shore up the CASA levels, he pointed out.