Canara Bank got the board’s approval to raise up to Rs 7,000 crore more in the current fiscal and would approach the markets when it gets “very attractive” interest rates, managing director and chief executive officer LV Prabhakar said on July 25.
“For the whole year, we have got the approval of raising Rs 5,500 crore of AT-1 (Additional Tier-1) bonds, and Rs 3,500 crore of tier-II bonds... but we will not be raising in one quarter because it has a cost. We are very conscious about the cost of AT-I and Tier-II bonds also,” Prabhakar said at a press conference after the bank declared its June quarter results.
“So as and when we require, and when we feel that we can get at a very attractive coupon, at that particular point of time we will be raising capital.”
Of the board's approved limit of Rs 9,000 crore, the public sector lender has already raised Rs 2,000 crore in AT-I bonds this fiscal, the MD said.
As on June end, the bank’s capital adequacy ratio (CRAR) stood at 14.91 percent, higher than 13.36 percent a year ago, Prabhakar said.
For the June quarter, the bank reported a consolidated net profit of Rs 2,058.3 crore, up 88 percent from the year-ago period aided by robust loan growth and stable asset quality.
The lenders’ total advances stood at Rs 7.83 lakh crore, up 14.5 percent year on year and 5.7 percent sequentially in the April-June quarter.
Prabhakar said the bank would continue reporting a “decent” double-digit growth, with a focus across retail, micro, small and medium enterprises (MSME) and corporate loans.
Also read: Canara Bank releases Q1FY23 results; here are top five takeaways
Corporate loans account for 44 percent of the bank’s total advances, while agriculture loans account for 24 percent of the loan book. MSME and retail loan segments each accounted for 16 percent of total loans each.
The bank is witnessing corporate loan demand from across sectors, Prabhakar said, adding credit offtake had particularly been better in the infrastructure, non-banking finance companies (NBFCs), construction, steel, cement and energy sector.
On asset quality, Prabhakar said throughout the current fiscal, fresh slippages would likely hit an upper limit of Rs 15,000 crore but the recovery amount would be higher than fresh slippages.
“…In the beginning of the year, I had given guidance that there will be slippages of about Rs 15,000 crore throughout the year… and our recoveries would be more than that. Our slippage ratio will be less than 1.75 percent…,” he said.
As on June end, Canara Bank’s gross non-performing asset ratio (GNPA) improved to 6.98 percent as on June 30 from 7.51 percent as on March end and 8.50 percent last year. Net NPAs improved to 2.48 percent in the first quarter of FY 23 as against 2.65 percent in last quarter of FY22.
The slippage ratio improved by two basis points (bps) sequentially to 0.36 percent during the reporting quarter, while credit cost trimmed to 1.38 percent from 1.53 percent the last quarter. One basis point is one-hundredth of a percentage point.
Subsidiaries
The work on the credit card subsidiary was in progress, and the bank would shape up the business model by the end of December, Prabhakar said.
Moneycontrol was on May 6 the first to write that Canara Bank was in the initial stages of discussion for launching a credit card subsidiary.
“…our super mobile app we launched on 22nd of this month and already about 4 million customers are using it. Regarding the subsidiary (for credit cards), it is a work in progress. By the end of Q3, we will be shaping up the model of the credit card subsidiary,” Prabhakar said.
He also said that the bank had launched an auditor-led inspection of all the 200 branches of Can Fin Homes after reports of fraud emerged.
There were certain deficiencies and some operational corrections were required and corrective action taken to avoid a repeat, he said.
“Subsequently, apart from the earlier Rs 3.7 crore fraud which we have declared, additional Rs 2.4 crore fraud was declared and 100 percent provisions were made and now everyone can have confidence in Can Fin Homes that everything is audited and now it is one of the best complaint subsidiaries,” Prabhakar said.
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