A spurt in non-performing assets ( NPAs) due to 100 per cent implementation of system-based NPA identification caused a 15 per cent dent in Canara Bank's net profit for the second quarter of this fiscal.
The bank's net profit stood at Rs 852.22 crore compared with Rs 1,007.88 crore recorded during the corresponding quarter of last fiscal.
“A major cleaning exercise was done comfortably and comprehensively. We are now in a position to produce much better results in the next two quarters, as we would not have the weight of hidden NPAs in smaller accounts,” said Mr S. Raman, Chairman and Managing Director, Canara Bank.
Though the bank made cash recoveries of Rs 808 crore during the quarter, it added net NPAs of Rs 187 crore too. This year so far, the bank's slippages are at Rs 2,500 crore, and “we are confident NPA slippages will not be much different from the last year despite smaller accounts coming into NPAs,” he said. The bank hopes to recover over Rs 3,000 crore this fiscal.
The net interest income of the bank was also marginally down due to reversal of income of Rs 120 crore during the quarter.
The banking system is witnessing a “silent liquidity overhang” due to which net interest margins are under pressure, Mr Raman pointed out. “The NIM scenario was a lot different over the last fiscal. In June, our NIM was 2.42 per cent, and now it is 2.64 per cent. We hope to substantially improve our NIM in the next two quarters, and our target is 2.75-2.8 per cent for the fiscal,” he said.
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