Date:03/05/2007 URL: http://www.thehindubusinessline.com/2007/05/03/stories/2007050302980600.htm

Back Canara Bank full-year profit rises 6%

Our Bureau

Recommends 70% dividend; gross income up at Rs 12,815 cr

REPORT CARD: Mr M.B.N. Rao (right), Chairman and Managing Director, Canara Bank, with Mr Alok K Misra, Executive Director, at a press conference in Bangalore on Tuesday. — G.R.N. Somashekar

Bangalore May 2 Canara Bank's board has recommended a 70 per cent dividend for the financial year 2006-07 after reporting a profit of Rs 1,420.81 crore, a six per cent increase over Rs 1,343.22 crore in the previous year.

Briefing reporters at a press conference today on the annual results, the bank's Chairman and Managing Director, Mr M.B.N. Rao, said: "Our record profits are despite the high provisions of Rs 1,491.66 crore." The bank's provisions for non-performing assets were Rs 457 crore and depreciation of investments Rs 549 crore.

The bank was able to absorb these provisions on account of the high operating profits. Operating profits were Rs 2,912.47 crore (Rs 2,549.93 crore). The improved performance was propelled by the better gross income. Gross income was at Rs 12,815.51 crore (Rs 10,027.08 crore). Interest income stood at Rs 11,364.56 crore (Rs 8,711.51 crore).

Cash recoveries help

The big jump in the gross income was also largely on account of the cash recoveries amounting to Rs 1,025 crore. Part of the recoveries is treated as extraordinary income by the bank, especially those fully written off and interest/penal payments. Besides, Mr Rao said there was also some loan re-pricing that contributed to the increase in its interest income.

The bank's gross expenditure growth was 32 per cent to Rs 9,903.04 crore (Rs 7,477.15 crore).

The increase was largely on account of the interest expenditure where some deposits were re-priced. Interest expenditure rose to Rs 7,337.73 crore (Rs 5,130.01 crore). Other operating expenditure, that included wages and establishment costs, rose 9 per cent to Rs 2,565.31 (Rs 2,347.14 crore).

Besides, he said, the bank was also containing the growth of risk-weighted assets, in sensitive sectors in line with the portfolio rebalancing prescribed by the RBI.

As a result, retail asset comprised 17.84 per cent in the financial year 2006-07 unlike the past when it was over 20 per cent.

The bank was able to defend its net interest margin at 3.15 per cent.

Basel II norm

Mr Rao said the bank would be fully Basel-II compliant by the end of this financial year. This was on account of the current capital adequacy ratio of 13.5 per cent, after the fund capital raising during the last financial year, that include a $250-million MTN issue last November. For 2007-08, Canara Bank was targeting a business of Rs 2.9 lakh crore, or a 20 per cent increase over the last financial year. This included deposits of Rs 1.7 lakh crore.

The bank was also converting its representative office in Shanghai to a full-fledged branch, and permission from the China's banking regulator was awaited, he added.