Weighed down by bad loans provisions, public sector lender Canara Bank posted just 9.9 per cent growth in net profit to Rs 252 crore for the first quarter ended June 30. The bank’s net profit in the April-June quarter of the previous financial year was Rs 229 crore.
The bank’s net interest income (NII) rose 17.6 per cent to Rs 2,713 crore, while its non-interest income increased by 33.06 per cent to Rs 2,109 crore in Q1FY18. However, higher-than-expected slippages pushed provisions for non-performing assets (NPAs) to 54 per cent, putting pressure on the bottom line.
The stock of the Bengaluru-based lender closed 0.58 per cent up at Rs 371 on the BSE. On the asset side, its quality worsened, with gross NPAs rising to 10.56 per cent in June 2017, up from 9.71 per cent in Q1FY17.
In a conference call with analysts, Rakesh Sharma, managing director and chief executive, Canara Bank, said it was a tough quarter.
The slippages of Rs 5,511 crore were higher than estimates. Out of these, four large corporate accounts had a share of Rs 2,712 crore and the small accounts (below Rs 1 crore) of Rs 792 crore as they lost moratorium enjoyed after demonetisation. The slippages in normal course were of about Rs 2,002 crore. Net NPAs or bad loans were 7.09 per cent of net advances on June 30, compared to 6.69 per cent a year ago.
There was a spike in the bank’s provisioning for NPAs to Rs 2,270 crore as against Rs 1,469 crore a year ago. Its provision coverage ratio (PCR) improved and stood at 54.52 per cent at end of Q1 FY18 from 50.82 per cent at end of Q1FY17. It expects to improve PCR by 2-3 per cent each year.
As for exposure to 12 big NPA cases, the bank said they constituted NPAs worth Rs 10,200 crore. The bank already holds provisions of Rs 5,600 crore for these accounts and have to make additional provisions of Rs 2,200 crore over three quarters.
On being the anchor bank for merging weak public sector banks with it, Sharma said at present discussions were at the government level only and the bank was not involved in it.
Its capital adequacy ratio improved to 12.61 per cent from 12.11 per cent a year ago. The bank would seek shareholders’ nod to raise Rs 3,500 crore through fresh issue of equity shares.