Canara Bank plans to raise Rs 7,000 crore in the remaining part of the financial year and float a credit card subsidiary, managing director and chief executive officer LV Prabhakar said.

The state-owned bank has already raised Rs 2,000 crore in AT-1 (additional tier-1) bonds this year. The board had earlier approved a fundraising programme of up to Rs 9,000 crore during the fiscal.

“We have got the approval to raise Rs 5,500 crore of AT-1 bonds and Rs 3,500 crore of tier-II bonds during the year,” Prabhakar said.

The bank will wait for the coupon rates to be attractive and will phase out its capital raising exercise. “We will not be raising the capital in one quarter. We are conscious about the cost of AT-1 and Tier-II bonds. When we find the coupon rates attractive, we will raise the capital,” Prabhakar told reporters in a media call after the bank announced its June quarter results.

As on 30 June, the bank’s capital adequacy ratio (CRAR) stood at 14.91% compared to 13.36% a year ago.

Canara Bank reported a net profit of Rs 2,022 crore for the fiscal first quarter ended June, up 71.9% from the year-ago period. This was aided by robust loan growth and stable asset quality.

Future Group turns NPA but fully provided for

During the quarter, the bank classified its Rs 1,240 crore exposure in Future group as a non-performing asset (NPA).

“Until the preceding quarter, the company (Future group) was making payments. But since payments did not come in the June quarter, we have classified it as an NPA.We also provided Rs 640 crore for this account. It is fully provided for at the end of the quarter,” Prabhakar said.

Net interest income up 71.9%

The bank’s net interest income (NII), the difference between interest earned and expended, rose 10.5% year-on-year to Rs 6,785 crore for the quarter ended 30 June 2022. But it was down 3.14% sequentially from Rs 7,005 crore in the March quarter.

Non-interest income was at Rs 5,175 crore, up 24.55% YoY.  It also rose sequentially from Rs 4,462 crore in Q4FY22.

Net interest margin (NIM) for the quarter was at 2.78%, up from 2.71% a year ago but down from 2.93% a quarter ago.

Asset quality

The asset quality of the bank improved as gross NPAs fell to 6.98% from 7.51% in the March quarter and 8.5% in the year-ago quarter.

The bank had a cash recovery of Rs 1,886 crore, upgrades of Rs 756 crore and write-off of Rs 2,225 crore.

Net NPA fell to 2.48% from 2.65% in the March quarter and 3.46% in the year-ago quarter.

Fresh slippages during the quarter declined to Rs 3,606 crore, from Rs 3,619 crore in the March quarter and Rs 4,253 crore in the year-ago quarter. Out of this, Rs 1,240 crore came from Future group.

The slippage ratio improved by two basis points (bps) sequentially to 0.36%.

“Our asset quality is improving. We expect Rs 15,000 crore of  slippages for the full-fiscal. Our recoveries and upgrades will outpace the fresh additions. Our slippage ratio will be less than 1.75%,” Prabhakar said.

Provisions for the quarter rose to Rs 4,584 crore from Rs 4,536 crore in the March quarter and Rs 4,304 crore in the year-ago quarter.

Advances

Canara Bank’s total advances grew faster in the June quarter than the banking system, jumping 14.5% YoY to Rs 7.83 lakh crore. Sequentially, it rose 5.7%. 

Prabhakar said the bank would continue to report a ‘decent double-digit growth’. The focus will be across retail, micro, small and medium enterprises (MSME) and corporate loans.

The corporate loan book  grew 14% to Rs 3,48,308 crore and accounted for 44% of the bank’s total advances. “We are seeing corporate loan demand from across sectors. Credit offtake has particularly been better in the infrastructure, NBFC (non-banking finance companies), construction, steel, cement and energy sectors,” Prabhakar said.

The agriculture advances of the bank grew by a robust 24% while MSME and retail loans each accounted for 16% of total advances. 

While home loans grew at 16.03%, gold loans paced up at 26.20%.

Deposits up

The bank’s total deposits stood at Rs 11.18 lakh crore as on 30 June 2022, up 2.9% quarter-on-quarter and 9.4% YoY.

Canara Bank’s low-cost current account and savings account (CASA) deposits fell 2.1% QoQ to Rs 3.61 lakh crore as on 30 June 2022. On a yearly basis, CASA deposits rose 8.8%. Term deposits, meanwhile, grew 5% QoQ and 8.4% YoY to Rs 6.91 lakh crore as on June-end.

Credit cost trimmed to 1.38% from 1.53% a quarter ago.

Credit card subsidiary

The bank is planning to float its credit card subsidiary by December-end. 

The work on the credit card subsidiary is in progress and we should be able to shape up the business model by the end of December, Prabhakar said.

Treasury ops

Despite hardening of bond yields, the treasury income, which is part of other income, rose by 46.17% to Rs 1,849 crore in Q1FY23 from Rs 1,265 crore in Q1FY22. Sequentially, the treasury income was up 32.64% from Rs 1,394 crore in the March quarter.

Canara Bank’s other income was lower in the given quarter. It stood at Rs 5,202.4 crore during April-June, lower than Rs 5,950.9 crore a year ago.

Other income includes proceeds from profit or loss on sale of assets, revaluation of investments, foreign exchange and derivative transactions, among others, the bank said.

Liquidators appointed in Syndbank subsidiary

Canara Bank informed in its notes to account adjoining the Q1 financial results that its wholly-owned subsidiary Syndbank Services Ltd is presently undergoing liquidation process and a liquidator has been appointed by the shareholders of the company on 22 June.