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Thursday, February 2, 2012

Corp Bank net up 5% in Q3

Higher cost of deposits, and provisions for loans and investment depreciation tempered Corporation Bank's net profit in the October-December 2011.

The public sector bank's net profit nudged up by 5 per cent to Rs 402 crore, against Rs 382 crore in the corresponding year-ago period.

In the reporting period, cost of deposits increased to 7.64 per cent (5.72 per cent in the October-December 2010 period).

While provisions for bad and doubtful debts increased by 22 per cent to Rs 440 crore (Rs 360 crore), that for investment depreciation jumped by 460 per cent to Rs 140 crore (Rs 25 crore).

According to Mr Ajai Kumar, Chairman and Managing Director, the thrust of the bank will be to grow the loan portfolio in the retail, small and medium enterprises, and agriculture segments.

Due to the relatively low current account, savings bank account (CASA) deposit base of 21 per cent (of total deposits), cost of deposits has come under pressure. The bank plans to increase the CASA base to 30 per cent in the next couple of years, said Mr Kumar.

To increase the CASA base and expand loan portfolio, the bank will open branches at the rate of 200 every year. Currently, the bank has 1,431 branches.

“We will step up recoveries, and increase focus on upgradation of assets and credit monitoring,” said Mr Ajai Kumar.
Aviation sector exposure

According to Mr Ashwani Kumar, Executive Director, Corporation Bank, the bank has an exposure aggregating about Rs 1,600 crore to Air India (Rs 1,300 crore) and Kingfisher Airlines (Rs 300 crore). The exposure to these distressed airlines accounts for just 1.73 per cent of the total advances of Rs 92,378 crore as at December-end 2011.

The bank is hopeful that a debt-restructuring mechanism for the national carrier will soon be hammered out so that banks' asset classification is not impaired. It has already downgraded the asset classification of Kingfisher Airlines to the sub-standard category.

Shares of Corporation Bank shares closed 0.05 per cent up at Rs 416.05 on the BSE on Thursday, against the previous close of Rs 415.85.


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