Spike in provisioning drags CanBank net down 19%

Public sector lender reported 18.8 decline in its third quarter net profit at Rs 710.51 crore as against Rs 875.56 crore for the quarter ended December 31, 2012 due to a 29 per cent hike in provision for bad and doubtful debts on year-on-year (y-o-y) basis.

The provision stood at Rs 625.90 crore for the December 2012 quarter compared to Rs 484.48 crore for the comparable period ended December 2011.

The Bangalore-based bank’s net non-performing assets as a percentage of total assets went up substantially and stood at 2.35 per cent as on December 31, 2012, compared to 1.49 per cent as on December 31, 2011.

Another factor that contributed to a fall in earnings was the dip in income from retail lending, down 52 per cent, from Rs 650.96 during the December 2011 quarter to Rs 306.35 crore for the quarter ended December 31, 2012. The decline was also on a sequential basis. The bank attributed it to efforts in increasing retail lending not paying off.

Total income for the December 2012 quarter was Rs 9,390.29 crore, up 9.51 per cent from Rs 8,574.45 crore. Interest income stood at Rs 8,544.48 crore during the December 2012 quarter, up 9.37 per cent on y-o-y basis.

During a media briefing, the CMD of the bank R K Dubey and ED A K Gupta said that the bank’s net interest margin stood at 2.36 per cent as at December 2012. Dubey expressed optimism on improving it in the coming months. “It is likely to be up at 2.46 to 2.50 per cent by March 2013.” The bank shed Rs 33,000 crore bulk deposits during the quarter; such deposits as a percentage of total deposits stood at 29 per cent as on December 31, 2012, Gupta said.

Dubey said that the bank restructured assets worth Rs 850 crore during the year while it recovered Rs 998 crore.

Total deposits and advances stood at Rs 3,23,693 crore and Rs 2,18,242 crore respectively as on December 31, 2012. Capital adequacy ratio was down at 12.64 per cent as on December 31, 2012.