Sharp hike in bond yield lowers Canara Bank net

July 21st, 2008 - 8:31 pm ICT by IANS  

Bangalore, July 21 (IANS) Rising inflation and sharp increase in bond yield have lowered net profit of the state-run Canara Bank for the first quarter of the current fiscal by 49 percent year-on-year (YoY). “Our net profit has declined by 49 percent to Rs.1.23 billion ($28.6 million) in the first quarter from Rs.2.41 billion in the same quarter of last fiscal due to rising inflation and sharp increase in bond yield,” Canara Bank chairman and managing director A.C. Mahajan told reporters here Monday.

Of the total investments of Rs.496.48 billion, 63 percent (Rs.312.78 billion) are held for maturity, 36 percent (Rs.178.73 billion) in government securities and one percent for trading.

“As against eight percent yield at the end of the previous quarter (January-March), the yield on government securities has shot up to 9.6 percent by the end of the first quarter due to the tightening monetary measures of the Reserve Bank to contain soaring inflation,” Mahajan pointed out.

To protect it from the mark-to-market loss in the bond market, the bank has made a provisioning of Rs.4.01 billion for the first quarter of the year against Rs.1.2 billion in the same quarter of 2007-08.

“Our operating profit, however, increased by 15 percent YoY to Rs.7.04 billion from Rs.6.12 billion for the corresponding quarter a year ago,” he said.

Net interest income increased by 14 percent YoY to Rs.10.19 billion from Rs.8.94 billion a year ago, while net interest margin improved sequentially by 15 basis points to 2.57 percent from 2.42 percent in the previous quarter.

The bank’s total business grew by 12 percent YoY to Rs.2.66 trillion from Rs.2.38 trillion.

Aggregate business was driven by 9.2 percent growth in deposits to Rs.1.56 trillion and by 16 percent growth to Rs.1.10 trillion in net advances.

“The bank’s core deposits, comprising retain and CASA (current account and savings account) deposits registered 20.4 percent YoY growth,” Mahajan added.

Credit to deposit ratio stood at 70.4 percent by the quarter-end.

The outgo towards debt waiver and debt relief scheme of the central government for 600,000 small and marginal farmers was Rs.15.5 billion.

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