The Hindu Business Line : Canara Bank net rises; core banking is driver

Upbeat on biz target: Mr M.B.N. Rao (right), Chairman and Managing Director, and Mr Alok K Misra, Executive Director, Canara Bank, at a press conference in Bangalore on Thursday. - G. R. N. Somashekar

Bangalore , Oct. 19

Canara Bank has reported a net profit of Rs 361.77 crore for the second quarter of the current financial year 2006-07, up 18.41 per cent from Rs 305.51 crore posted during the corresponding quarter of the previous fiscal.

Briefing reporters on the Q2 results, Canara Bank's Chairman and Managing director, Mr M.B.N. Rao, said: " Our performance was entirely out of core banking operations." This was evident from the gross income and interest earnings. The bank posted a higher gross income of Rs 2,993.23 crore (Rs 2490.19 crore). Interest income on advances, investments and cash balances for the period rose to Rs 2,679.95 crore (Rs 2,101.27 crore). But interest on advances rose to Rs 1,792 crore (Rs 1291.47 crore).

Mr Rao said part of the increase in interest income was also contributed by re-pricing of some advances.

Gross expenditure was contained at Rs 2,378.05 crore (Rs 1,909.08 crore). Interest expenditure was up at Rs 1,698.84 crore (Rs 1,294.60 crore.)

However, the increase was largely on account of deposit accretion during the period. Deposits at the end of the quarter were Rs 1,22,121 crore. The operating profits of the bank for Q2 were up at Rs 615 crore (Rs 581 crore). But Canara bank has chosen to increase the provisions for non-performing assets to Rs 197 crore (Rs 165.07 crore).

NPA Provision

Mr Rao said that the bank preferred to fully provision all substandard assets in line with prudential accounting policies adopted. The higher provisioning was despite the reduction in gross non-performing assets to Rs 1,761.45 crore (Rs 2,296.19 crore). The reduction in NPA was helped by cash recovery of Rs 443 crore.

He said that the bank hoped to reach the advances target of Rs 95,000 crore by the end of FY07. For this purpose the bank had already raised capital of Rs 1,075 crore by way of subordinated bonds and upper tier-II bonds respectively.

In addition the bank's hybrid capital issue in the international markets was also underway. The bank had also applied for fresh branch licences in 21 international locations, in North America, Europe, West Asia and Far East Asia.

Life Insurance

Mr Rao said the bank expects to finalise its strategic partners for the life insurance venture and its asset management company by the third quarter of FY07. He said the bank was moving to life insurance since retail savings was moving to the insurance sector in a large way.

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