Hopeful of better CASA ratio in FY13: Canara Bank

Public sector lender Canara Bank's profit declined despite a rise in its core income in the fourth quarter of FY12. The company's profit was lower than estimated and stood at Rs 829 crore compared to Rs 898.9 crore in the corresponding quarter last fiscal.

In an interview with CNBC-TV18, S Raman, CMD, Canara Bank said that the bank had taken a studied attempt for consolidation and de-risking in the last fiscal.
With a positive outlook for FY13, Raman pointed out, "We are right now on track. We have a full handle on our portfolio. Our asset quality is going to be extremely strong and going to be looked at with a great deal of satisfaction and happiness by the market."
Going forward, the bank is also looking to improve its  current account savings account ratio (CASA) ratio.
Canara Bank recorded a 3.4% increase in net interest income (NII) to Rs 2,040 crore from Rs 1,973 crore year-on-year. It posted a lower than expected profit after tax (PAT) at Rs 829 crore for the fourth quarter of FY12, down 7.8% as compared to Rs 899 crore in a year ago period.
The gross non-performing assets (NPAs) of Canara Bank declined at 1.73% for the fourth quarter of FY12, versus 1.81% in the previous quarter. Net NPAs too dropped at 1.46% versus 1.49% during the same period last year.
Gross NPAs stood at Rs 4,032 crore in the quarter ended March 2012 versus Rs 3,999 crore in the December quarter. Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video. Q: What's happened on the bottom-line, because over there the numbers seem much lower than estimated, Rs 829 crore?
A: This year I would characterise it as a year of consolidation and de-risking in Canara Bank. We did not grow to the expected levels this time. Some of it was a conscious decision.
Canara Bank has been hugely dependent during the last few years on wholesale tickets and that in fact has become a bit of a risky area. We concentrate on two-three things this time as part of de-risking. One, we will not concentrate too much on infrastructure, where our exposure was perceived by the market also as rather high. Number two, we were also heavily dependent on short-term corporate loans.
This year we have reduced our short-term corporate loans by over Rs 10,000 crore. Actually, what the bank has done has been a very studied attempt at consolidating our position. This year we tackled the big problem of small NPA accounts. Another major achievement in this quarter is we would see from our figures that our NPAs have hardly increased.
We were expecting it to be slightly lower than the December figure. But, it is only marginally above that figure. One or two accounts which have been classified as an NPA in December have since been upgraded.
We are right now on track. We have a full handle on our portfolio. Our asset quality is going to be extremely strong and going to be looked at with a great deal of satisfaction and happiness by the market. Q: At this point by the end of this quarter, what is the exposure of the total book to infrastructure and on the point you made about NPAs, any targets before the end of the calendar year in terms of where you expect net NPAs to settle down at? And will you have to change around provisioning significantly?
A: We have very well provided for our NPAs. The only pressure point for Canara Bank, if I may say, is going to be the restructuring of some electricity board accounts. But, from looking at what is happening, what has appeared in the newspapers today, government is fully involved in solving this problem. In fact, our provisional requirements and in many ways our portfolio is going to look healthier very soon.
Our total exposure to the electricity boards, which need restructuring, is Rs 5,000 crore and whatever we have done thus far has no NPV loss at all. There is not going to be any issue regarding this. Other than the electricity board accounts and the discom account, I am very happy to say that the prospective accounts for restructuring is hardly anything, at the most Rs 1,000 crore. We are in a very strong brigade so far as our asset quality is concerned. So, I am sure, when I say that this has been a year of de-risking and consolidation. Q: We don't have your margin picture. Could you just share that with us in terms of where Net Interest Margins have come in this quarter?
A: Margin picture is 2.5%. One of the weaknesses of Canara Bank has been its lower CASA ratio. We are trying to very hard and results will hopefully show in a year or so. We used to have some technological problems in IT which resulted in some amount of customer attrition during the previous two-three years. All that has been fixed.
We are very sure that CASA is going to show a good rise. Savings bank account increase was about 10-11%. It is the current account where we got hurt and we are determined to fix the problem.