Canara Bank posts Rs 4,860 cr loss in Q4 as NPA provisions jump 3-fold

Canara Bank on Friday reported a net loss of Rs 4,859.77 crore for the fourth quarter ending March 2018 due to three-fold rise in provisions towards bad loans.

Bad loans surged on account of the Reserve Bank of India’s circular on revised guidelines, divergences in classification of non-performing assets (NPAs) and some pain in the agriculture loans.

The government bank received a tax expense write-back of Rs 2,450.62 crore, without which the loss would have been steeper.

 This is the second biggest quarterly loss reported by a public sector bank since the bad loan clean-up exercise started in 2015. Previously, Punjab National Bank had reported a loss of Rs 5367 Crore in March quarter ending 2016.

In the year-ago period, the government bank had swung back to a profit of Rs 214 crore due to lower provisions and healthy non-interest income.

Provisions during the quarter shot up by 200 percent to Rs 8762.5 crore for the January to March period 2018 from Rs 2924 crore in the same period last year.

In a statement, the management stated that “with stress already nearly fully recognized, the bank is poised for a stable and profitable growth during the current year”.

Asset quality

During the quarter under review, gross NPAs jumped to Rs 47,468 crore as on March end 2018, up 18 percent from Rs 40,312 crore in the December quarter.

As a percentage of total loans, gross NPAs worsened to 11.84 percent from 10.38 percent in the preceding quarter and 9.63 percent in the year-ago period.

Net NPA ratio also deteriorated to 7.48 percent of total loans from 6.78 percent in December and 6.33 percent in March 2017.

Slippages of loans into NPA category during Q4 FY18 stood at Rs 13,208 crore due to front loading of NPA recognition notwithstanding the RBI dispensation available.

The bank said it has not opted for availing the RBI dispensation for staggering of the NPA provisioning after the recent RBI guidelines on stress recognition and resolution.

“It has front loaded the NPA recognition and the consequent higher provisioning has consumed the operating profit. The provisioning on account of NPAs has increased to Rs 13,770 crore during 2017-18 from Rs 7,792 crore during the previous year (2016-17),” the bank said in its statement.

Divergence in bad loans

For FY17, Canara Bank reported divergence in classification of gross NPAs worth Rs 3,248 crore as compared to Reserve Bank of India’s assessment of its bad loans. Net NPA divergence stood at Rs 1847 crore.

Divergence in reporting of provisions was also reported at Rs 1401 crore.

Interest income and NIM

NII or net interest income, the difference between interest earned on loans and that paid on deposits, increased by 10.3 percent to Rs 2987 crore from Rs 2708 crore in the same quarter last year.

Other income fell by 44 percent to Rs 1,332 crore crore from Rs 2396 crore in March quarter last year.

NIM or net interest margins improved to 2.65 percent from 2.39 percent a year ago.

Loan and deposit growth

Domestic loan growth stood at 12 percent to 3.53 lakh crore backed by retail growth of 30 percent, medium sector enterprise (MSE) loan growth of 22 percent and other personal loans growth at 56 percent.

Total domestic deposits rose by seven percent to Rs 4.86 lakh crore.

Full financial results

For the full year ending March 2018, the net loss stood at Rs 4,222.24 crore at the end of March 2018 as against a profit of Rs 1121.92 crore in FY17.

NII improved by 23 percent to Rs 12,163 crore from Rs 9,872 crore in FY17.

Non-interest income declined 8 percent to Rs 6,943 crore from Rs 7554 crore in FY17 due to dip in treasury income.

Results were posted after-market hours on Friday. At day’s end, Canara Bank’s shares ended weaker by 0.92 percent at Rs 246.35 per share, as compared with 0.82 percent rise in BSE Sensex trade.

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