Canara Bank

Stable asset quality, margin declines

Jul 25, 2019 06:07 IST capital market

Canara Bank recorded 17% growth in the net profit to Rs 329.07 crore for the quarter ended June 2019 (Q1FY2020), driven by decline in provisions and operating expenses. The bank has maintained stable business growth with loan book rising at steady pace of 12%. The bank has also exhibited marginal improvement in asset quality in Q1FY2020.

However, the bank has recorded 17% decline in the net interest income, while non-interest income also rose at subdued pace of 2% in Q1FY2020. The bank has exhibited increase in cost-to-income ratio, causing 17% decline in the operating profit in Q1FY2020. The bank has also exhibited increase in fresh slippages of loans on sequential basis in Q1FY2020. The CASA deposits ratio of the bank declined to 29.5% end June 2019 from 32.4% end June 2018.

Asset quality stable: Bank has maintained stable asset quality with higher recoveries, upgradations and write-offs in Q1FY2020.

  • Fresh slippages of advances to NPA category were at Rs 3676 crore in the quarter ended June 2019. The recoveries and upgradations were at Rs 1563 crore and write-offs were at Rs 1938 crore.
  • Outstanding standard restructured advance book stood at Rs 4877 crore (1.1% of advances) at end June 2019 from 1.0% a quarter ago.
  • Stressed advances of the bank was flat at 6.2% of advances at end June 2019 from 6.2% a quarter ago.
  • The bank has improved provision coverage ratio for NPAs to 68.6% at end June 2019 from 68.1% a quarter ago.
  • Risk weighted assets moved up 1% to Rs 363053 crore at end June 2019.
Asset Quality Indicators: Canara Bank
201906 201903 201812 201809 201806 Variation
QoQ YoY
Gross NPA (Rs Crore) 39399.02 39224.12 44621.27 45233.22 44659.56 0 -12
Net NPA (Rs Crore) 23149.62 22955.11 26591.07 26777.64 26693.50 1 -13
% of GNPA 8.77 8.83 10.25 10.56 11.05 -6 -228
% of NNPA 5.35 5.37 6.37 6.54 6.91 -2 -156
Provision coverage ratio % 68.62 68.13 62.54 61.39 60.69 49 793
% CRAR - Basel III 11.70 11.90 12.21 12.62 13.00 -20 -130
% CRAR - Basel III - Tier I 8.92 9.03 9.54 9.86 10.12 -11 -120
Variation in basis points for figures given in percentages and in % for figures in Rs crore

Business Highlights

Business growth stable: Global business of the bank rose at steady pace of 13% yoy at Rs 1059964 crore at end June 2019. Deposits growth moved up 15% yoy to Rs 610674 crore, while the advances increased 11% at Rs 449290 crore at end June 2019. The credit-deposit ratio of the bank declined to 70.9% from 71.4% a quarter ago and 72.4% a year ago.

CASA ratio eases: CASA deposits rose 5% yoy to Rs 170319 crore at end June 2019. CASA ratio declined to 29.5% at end June 2019 from 30.9% a quarter ago and 32.4% a year ago.

Overseas business share declines: Banks overseas business share eased to 5.65% of the total business at end June 2019 compared to 5.7% a quarter ago and 6.2% a year ago. Overseas business increased 4% at Rs 58977 crore at end June 2019. Overseas advances increased 6% to Rs 25742 crore, while deposits moved up 3% to Rs 33235 crore at end June 2019.

Domestic advances growth ease: Domestic advances of the bank increased 11% to Rs 423548 crore, domestic deposits increased 15% to Rs 577439 crore at end June 2019.

Domestic Investment book expanded 4% yoy to Rs 151741 crore at end June 2019. HTM book declined 8% to Rs 87286 crore, while the AFS book increased 27% to Rs 64332 crore at end June 2019. Duration of AFS book stood at 2.61 years and total investment book was 4.41 years at end June 2019.

NIM declines: NIM of the bank dipped 47 bps qoq 2.29% in Q1FY2020. Cost of fund declined 32 bps qoq to 5.28%, but yield on fund plunged 68 bps qoq to 7.19% in Q1FY2020.

Network expansion: Bank added 8 domestic branches in Q1FY2020, taking the total tally under the branch network to 6323 branches at end June 2019. The overseas branch network stood at 7 branches. The total number of ATMs stood at 8837 ATMs as at end June 2019.

Book Value per share stood at Rs 399.1 per share at end June 2019, while adjusted book value (net of NNPA and 25% of restructured advances) stood at Rs 75.5 per share at end June 2019.

Quarterly Performance:

NII dips on margins decline: Bank has reported 7% increase in the interest earned at Rs 12200.52 crore, while interest expenses moved up 20% to Rs 8959.91 crore. NII dipped 17% yoy to Rs 3240.61 crore in Q1FY2020.

Fee income declines: Bank has posted 156% jump in treasury income to Rs 156 crore, while forex income also galloped 143% to Rs 241 crore in Q1FY2020. However, the core fee income declined 11% at Rs 1031 crore and the recoveries in written off accounts also dipped 35% to Rs 327 crore in the quarter ended June 2019. The overall non-interest income increased 2% yoy at Rs 1861.87 crore in Q1FY2020.

Expense ratio rises: Employee cost rose 3% to Rs 1559.81 crore, while the other operating expenses declined 13% to Rs 1102.66 crore. The total operating expenses fell 4% to Rs 2662.47 crore. Expense ratio increased 349 bps yoy to 52.18% in Q1FY2020.

The operating profit declined 17% to Rs 2440.01 crore in Q1FY2020.

Provisions declines: Provisions and contingencies declined 26% to Rs 1899.13 crore during quarter ended June 2019.

With the decline in provisions, the profit before tax increased 54% to Rs 540.88 crore in the quarter ended June 2019.

Tax rates rises: The effective tax rate increased to 39.16% in Q1FY2020 from 19.69% in Q1FY2019. Net profit moved up 17% to Rs 329.07 crore in Q1FY2020 over Q1FY2019.

Annual Financial Performance:

For the year ended March 2019 (FY2019), the bank posted net profit to Rs 347.02 crore compared with net loss of Rs 2338.62 crore in FY2018. The net interest income improved 19% to Rs 14478.12 crore, while non-interest income declined 5% to Rs 6574.96 crore in FY2019. The expense ratio improved 33 bps yoy to 49.69% in FY2019. The operating expenses increased 9% to Rs 10462.21 crore, while provision and contingencies declined 20% to Rs 12918.28 crore in FY2019. The pre-tax losses came in at Rs 2327.41 crore in FY2019. The bank has written back tax provisions of Rs 2674.43 crore, helping to report net profit of Rs 347.02 crore in FY2019.

Canara Bank: Financial Results

 

Particulars 1906 (3) 1806 (3) Var % 1903 (12) 1803 (12) Var %
Interest Earned 12200.52 11359.55 7 46810.34 41252.09 13
Interest Expended 8959.91 7476.65 20 32332.22 29088.76 11
Net Interest Income 3240.61 3882.90 -17 14478.12 12163.33 19
Other Income 1861.87 1832.91 2 6574.96 6942.85 -5
Net Total Income 5102.48 5715.81 -11 21053.08 19106.18 10
Operating Expenses 2662.47 2783.02 -4 10462.21 9557.94 9
Operating Profits 2440.01 2932.79 -17 10590.87 9548.24 11
Provisions & Contingencies 1899.13 2582.30 -26 12918.28 16109.10 -20
Profit Before Tax 540.88 350.49 54 -2327.41 -6560.86 -65
Provision for Tax 211.81 69.00 207 -2674.43 -2338.62 14
PAT 329.07 281.49 17 347.02 -4222.24 LP
EPS*(Rs) 17.47 14.95 4.61 -56.05
* Annualized on current equity of Rs 753.24 crore. Face Value: Rs 10, Figures in Rs crore
PL: Profit to Loss, LP: Loss to Profit
Source: Capitaline Corporate Database

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