After a five-year hiatus, Canara Bank has declared a dividend, after a strong run of numbers in its last quarter. LV Prabhakar who took over as Managing Director and CEO of the bank in February 2020 said that this year the bank is aiming for a balance sheet above ₹20 lakh crore with healthy and profitable double-digit growth in its loan portfolio, even as he says Canara is poised for sustainable growth. The bank is also launching a great app in a month. Edited excerpts:
After a 5-year break, the bank announced a dividend for the first time. What helped the bank improve its performance?
When I took office in February 2020, during the first quarter of June, we announced a net profit of ₹406 crore. In the just-ended March quarter, the bank reported a net profit of ₹1,666 crore, indicating growth of over 300%. Net NPA (non-performing assets) fell to 2.65% in the quarter just ended, from 3.95% in the June quarter of 2020. Our return on assets increased by 41 basis points during the same period.
In the last quarter, credit growth was 9.77% compared to our forecast of 7.5%. We have consistently exceeded promises and exceeded expectations over the past two years. In the RAM (Retail, Agriculture, MSME) space, we have done very well. In business and housing loans as well, we are showing good growth.
We are doing co-loans with a few partners and can increase our partnership to two more players as we intend to co-loan around ₹9,000 crore this year. We are also targeting loan recoveries of ₹15,000 crore.
With the cost of funds rising, how do you plan to grow your loan portfolio while maintaining profitability.
The growth of our CASA (current account, savings account) is 11.5% and the growth of (other) savings of 12.2% has been very healthy. Our cost of deposits is 3.95%, the overall cost of funds is 3.6%. On the other hand, my yield on advances is 7.22% and the NIM (net interest margin) is 2.82%, which this year we will increase it to 2.90%. Due to effective management of bulk and retail term deposits and CASA’s continued growth, we have managed our funds well. This year, we will raise ₹9,000 crore by issuing additional Tier 1 and Tier 2 bonds, but we have no stock dilution plan.
After the merger (from Syndicate Bank to Canara), what was the technological roadmap?
We successfully addressed human resources, technology and process issues post-merger. In fact, the number of opportunities for our staff increased after (the merger), which is reflected in the performance. We are one of the few major banks that have granted our employees 15-day performance-related incentives.
On technology, we have identified an investment roadmap of ₹1,000 crore and partnered with Oracle and IBM to ensure greater convenience for customers. We spent ₹800 crore and another ₹200 crore would be spent on mobile banking, internet and related areas.
Although we currently have a good app, next month we will be launching a great app with over 250 features for the convenience of our customers. Already, 8,000 people are testing the application, including employees and customers. We will launch in a month.
May 18, 2022