Corporation Bank net up 14% despite rise in NPAs

Corporation Bank's net profit increased 14 per cent to Rs 401 crore in the quarter ended September 30, 2011, from Rs 352 crore in the corresponding quarter last year.

The bank saw a huge rise in non-performing loans on account of moving to the system based recognition of NPA, said Mr Ajai Kumar, Chairman and Managing Director.

Gross NPAs increased to Rs 1,080 crore (Rs 740 crore) and provisions increased to Rs 205 crore (Rs 98 crore).

“NPAs are the biggest challenge for the bank. The number of small NPA accounts has gone up due to the system based recognition of NPAs. Even those cases that were borderline are now shown as NPAs,'' said Mr Kumar

The bank will focus on recovery from NPAs over the next six months and target a gross NPA ratio of less than 1 per cent, he added.

The high cost of deposits also impacted the bank's profitability. The bank plans to improve its share of low-cost current and savings account (CASA) from the current 21.8 per cent. There is no immediate plan to increase the savings bank rate as it will impact profitability, Mr Kumar said.

Going ahead the bank will focus on retail and SME segments. In the current financial year, the bank is targeting deposit growth of 25 per cent, advances growth of 20 per cent, NIM at 3 per cent and CASA at 30 per cent.

Shares of Corporation Bank closed at Rs 426.75, up 2.92 per cent, from Rs 414.65, on the BSE, on Monday