Canara Bank announces first quarter results, net profit down

State owned Canara bank announced its results for the quarter ended 30 June, 2011-12 on July 27, 2011-12. The Karnataka based lender reported a decline in net profit by 28.37 percent to Rs 725.85 crore in the April-June quarter of 2011-12, as compared to Rs 1,013.37 crore in Q1, 2010-11 on the back of rise in deposit rates during the period. The total interest income of the bank increased by 39.13 percent to Rs 7,180.75 crore in Q1, 2011-12, as compared to Rs 5,160.88 crore in the year ago period. The net interest income increased only by 3 .77 percent to Rs 1,793 crore in Q1,2011-12 ,as compared to Rs 1,727.83 crore in the same quarter last year. Total income increased by 30.74 percent to Rs 7,707.59 crore in Q1, 2011-12, as compared to Rs 5,894.95 crore in Q1, 2010-11. The Company's net interest margin was 2.5 percent in the reported quarter.

The total expenses of the bank rose year on year by 45.91 percent year on year to Rs 6,437.19 crore in Q1, 2011-12, with the interest costs rising by 57 percent year on year to Rs 5,387 .67 crore. This hit the bank's margins as the operating profit declined by 14 .35 percent to Rs 1,270.4 crore in Q1, 2011-12, as compared to Rs 1,483.34 crore in the year ago period. The operating margin fell to 16.48 percent in Q1,2011-12, as compared to 25.16 percent in Q1,2010-11.The provisions and contingencies of banks increased by 56.63 percent to Rs 344.55 crore in Q1,2011-12, as compared to Rs 219.97 crore in the same quarter last year.

The net NPA of the bank increased year on year by 66 percent to Rs 2.871.06 crore in Q1, 2011-12 as the bank went in for the new system based recognition of NPA during the reported quarter. Percentage of Net NPAs increased to 1.34 percent in Q1, 2011-12, as compared to 1 percent in the year ago period. The rising interest rate scenario due to continuous monetary tightening by the RBI , also made it difficult for borrowers to repay bank loans . The profit before tax declined by 26 percent to Rs 925.85 crore in Q1, 2011-12, as compared to Rs 1,263.37 crore in the year ago period.

Among the segments, the treasury increased by 6.32 percent year on year to Rs 1,664.54 crore in Q1, 2011-12, retail segment posted a year on year growth of Rs 1,673.73 crore, while wholesale segment grew year on year by 59.8 percent to Rs 4,246.1 crore in the reported period.

The bank faces a challenging macroeconomic scenario ,with the rise in key rates by RBI, the credit growth of the bank may be hurt in the coming quarter and will have to manage its NPAs in the coming quarter to maintain its margins.