Back

Analyst Meet / AGM - Analyst Meet

Expects significant decline in credit cost to 1.25% in FY2019

Canara Bank

16-May-2018, 09:28
Canara Bank conducted an analyst meet on 15 May 2018 to discuss the financial results for the quarter ended March 2018 and prospects of the bank. Rakesh Sharma - MD & CEO of the bank addressed the meet:
Highlights:

The performance of the bank was impacted due to various reasons in the quarter ended March 2018. The sharp increase in bond yields from 6.66% end March 2017 to 7.4% end March 2018 caused decline in treasury income, while also led to surge in MTM losses in the investment book. The RBI tightening of NPA recognition and resolution norms also led to higher classification of NPAs in various restructuring loans schemes.
The bank has also not utilized RBI dispensation regarding spreading of MTM losses over four quarters, reduced provision for NCLT cases and spreading of fraud related provisions to four quarters, while required provisions were made in one quarter Q4FY2018. The overall impact of these three dispensations amounted to Rs 2031 crore on earnings in Q4FY2018.
Under NCLT - 1 and 2 list, the bank has exposure to Rs 15000 crore of loans. The bank expects haircut of around 40%, while it holds excess provisions at the rate of 62% on NCLT exposure.
The bank has recorded healthy growth in net interest income, but the treasury income has declined sharply which has led to deterioration in cost to Income ratio.
The bank has improved its CASA deposit ratio to 34.3% in March 2018
The fresh slippages of advances jumped to Rs 13346 crore in Q4FY2018, of which Rs 8181 crore on account of tightening of asset quality norms by the RBI in February 2018. The NPA divergence also contributed to the fresh slippages of loans. However, the normal slippages amounted to Rs 2500 crore in Q4FY2018.
Sector wise, power sector contributed fresh slippages of Rs 5200 crore, textiles at Rs 956 crore and construction at Rs 797 crore etc in Q4FY2018.
Going forward, the bank expects to contain fresh slippages of loans at below Rs 2500 crore per quarter in FY2019.
The SMA-2 category loan book of the bank has declined sharply from Rs 14879 crore end March 2017 to Rs 2924 crore end March 2018.
With regarding to the quality of loan book, the bank has substantially reduced the ratio of risk weighted assets to total assets to 87.7% end March 2018 from 95.4% end March 2017.
The bank is targeting loan growth of 10-12%, with higher retail loan book growth of 20% in FY2019. The agriculture and MSME loan segment is targeted to grow 10%, while corporate loan book is targeted to grow 7 to 8%.
With the focus on cost Optimization, the bank would control cost and further improve CAS deposit ratio in FY2019.
The bank has made provision for wage revision at the rate of 10% against the ongoing discussions on 2% wage hike. The wage hike provisions stood at Rs 90 crore in Q4FY2018.
The bank has exhibited only marginal increase in stressed assets ratio to 12.76% end March 2018 from 12.5% end March 2017.
The bank expects to maintain net interest margin at 2.65 to 2.7% in FY2019.
The bank expects a significant decline in its credit cost to 1.25% in FY2019 from 3.59% in FY2018.
The bank expects to reduce gross NPA ratio to 9.5% and net NPA ratio to 5.5% by September 2018 and further down below 9% and 5% respectively by end March 2019.