Canara Bank has reported a 115% year-on-year rise in net profit to Rs 1,502 crore for the fiscal third quarter ended December on lower provisions.

The state-owned bank is likely to raise Rs 1,000 crore of additional tier-1 bonds if it gets a good interest rate.

“During the quarter, we concentrated on net interest income (NII) as treasury income was to be impacted due to hardening of yields, " Canara Bank chief executive LV Prabhakar told reporters.

"Our strategy was to grow NII to compensate for the deficiency in the treasury income. This worked well and we could increase NII by 14% over the previous year,” he added.

The bank’s NII, or the difference between interest earned and interest expended, stood at Rs 6,945 crore in the quarter ended December 31, 2021, up from Rs 6,086 crore a year ago.

Net interest margin in the reporting quarter was higher at 2.83% from 2.72% in the year-ago period.   

Profit for the December quarter came in despite the bank setting aside the entire additional liability of Rs 1,354.90 crore to provide for the revision in the family pension under the 11th industry-wide bipartite wage settlement.

Non-interest income (NII) comprising fee-based income, trading income, recovery in written-off accounts, declined 13% over the previous year to Rs 3,612 crore.

The lender's asset quality, ex-RBI-dispensation in Q3 FY21, was the best in 24 quarters.

Gross non-performing assets (NPAs) in the December quarter came down to 7.8% in Q3, from 8.42% in the preceding quarter. Net NPA ratio fell to 2.86% from 3.21% a quarter ago. 

Fresh slippages stood at Rs 2,699 crore in the reporting quarter, lower than Rs 6,525 crore a quarter ago but higher than Rs 395 crore during the corresponding period of the previous year. Stressed loans accounted for merely 1.76% of total portfolio versus 3.63% a year ago.

The bank recovered Rs 2,784 crore in the December quarter from bad loans as well as written off accounts. This stood at Rs 2,893 crore in the year back period.

The provisions were down 36% over the previous year, while on a sequential basis they were down 31%. The lender’s provision coverage ratio improved to 83.26% as of December-end.

The lender raised its provisions to the SREI group of companies to 75% during the quarter, up from the 50% it had held in the second quarter. The bank has an exposure of Rs 3,100 crore to the group.

Canara Bank is looking at a double-digit credit growth for the full fiscal, said Prabhakar. The bank reported a 9.3% YoY credit growth to Rs 7.3 lakh crore at the end of December.

As on December 31, 2021, Canara Bank’s capital adequacy ratio stood at 14.80%, of which common equity tier-I ratio stood at 10.12%.