Bengaluru-headquartered Canara Bank reported a 200% rise in net profit to Rs 1,332.61 crore in the fiscal second quarter ended September, led by a robust growth in non-interest income, improving asset quality and lower provisioning for bad loans. In the year-ago period, net profit stood at Rs 444 crore.

A cash recovery of Rs 700 crore from Dewan Housing Finance Corporation Ltd (DHFL) also helped the bank’s second quarter performance. The public sector bank received Rs 1,700 crore on the DHFL account, but Rs 900 crore is in the form of bonds in its investment book. Canara Bank also provided Rs 191 crore as mark-to-market on these bonds.

Canara Bank has provided a 50% provisioning coverage for Srei Infrastructure, where it has an exposure of Rs 3,200 crore. The bank will continue to pursue Rs 1,990 crore of personal guarantees the promoters had given it. 

The bank expects to get about Rs 15,000 crore from written off accounts by the end of the financial year.  This will help in provisioning for bad loans and also boost the bank’s profitability. 

“The profits can be contributed to the sharp rise in our non-interest income, a steady interest income and recoveries. As advances grow, we will continue to see stable interest earnings and good growth in fees and commissions. We are also expecting recoveries to outpace the fresh NPA (non-performing asset) additions,” Canara Bank managing director and CEO LV Prabhakar said in a media call.

The bank’s total income rose 2.6% to Rs 21,331.49 crore in the September quarter versus Rs 20,793.92 crore a year ago. 

The non-interest income of the bank was up 37.54% to Rs 4,268 crore. This includes a 144 % rise in the profit on sale of treasury investment of  Rs 1,133 crore while fee-based income showed a 20.2% growth at Rs 1,463 crore, which was led by service charges (up 25.63% to Rs 804 crore). 

However, the bank’s net interest income (NII) or the difference between interest earned on loans and interest expended on deposits dipped 0.51% to Rs 6,273 crore during the quarter  from Rs 6,305 crore in the year-ago period, as interest on advances came down by 7% over the previous year to Rs12,164 crore. Net interest margin (NIM) fell to 2.72% from 2.82% a year ago.

Other interest income rose 65.29% to Rs 681 crore during this period.  Total cash recovery was Rs 3,002 crore during the quarter.

The bank’s gross advances grew 5.8% year-on-year to Rs 6.87 lakh crore. The retail loan book, which constituted 17.35% of the total advances, grew 10.46%  to Rs 1.19 lakh crore. Within the retail segment, home loans grew 14.21% over the previous year to Rs 67,386 crore while vehicle loans rose 8.38% to Rs 13,697 crore and education loans by 7.13% to Rs 12,719 crore. Other personal loans grew 4.05% to Rs 25,336 crore. 

“We have underwritten Rs 33,000 crore worth of loans which is waiting for disbursal. So the bank is expecting to see a steady growth of 7% for corporate credit and 14% for retail credit this fiscal,” Prabhakar said.

Domestic business of the bank reported a growth of Rs 1,05,149 crore , led by  treasury income at Rs 1,754 crore with a growth of 95.10% and cash recovery with a growth of 90.32%.  

The bank’s asset quality improved in the September quarter as its gross NPAs fell to 8.42% of advances as against 8.50% a quarter ago. In value terms, gross NPAs stood at Rs 57,853.09 crore.  Net NPAs fell to 3.21% (Rs 20,861.99 crore) from 3.46%  on a sequential basis.

Recoveries and upgrades outpaced the fresh bad loan additions, a trend that the bank expects to continue till the end of the financial year. Cash recovery was at Rs 3,717 crore, including from written off accounts. The bank upgrades stood at Rs 2,671 after borrowers repaid their pending dues, and it wrote off Rs 1,585 crore worth of loans, taking the total reduction to Rs 7,285. The fresh NPA additions during the quarter stood at Rs 6,896 crore. 

Provisions for bad loans and contingencies for the quarter fell to Rs 3,360.23 crore from Rs 3,974.02 crore a year ago. The provision coverage ratio of the bank is 82.44%.

At the end of the quarter, the bank’s branch network stood at  9,800, out of which 3,037 were located in the rural region, 2,796 in semi-urban, 1,971 in urban and 1,996 in the metros. The bank had 10,988 ATMs servicing its customers.