Canara Bank proved a strong mover, surging 7.4% to Rs 63.15 in morning trades on Tuesday, after the bank said net profit jumped 83% for the third quarter ended 31 December 2002.
At the current level, the scrip was just a tad below its day's high of Rs 63.30 (a life-time high). Heavy volumes of 11.8 lakh Canara Bank shares were registered in just a few minutes of trading on BSE.
The scrip gained 5.6% to Rs 58.80 on Monday after the company's results reached the market towards close of trading . With today's rise, the scrip has surged 13.4% in just two trading sessions .
The stock also moved up in the run-up to the Q3 results. From Rs 46.35 on 6 January 2003, the stock gained 20% in nine sessions to Rs 55.65 on 17 January 2003. The Canara Bank stock has proved to be a winner, especially for those who had originally purchased the share in the primary market. The bank, which came out with its public issue at Rs 35 per share (face value of Rs 10), made its debut on the BSE at Rs 43 on 23 December 2002. On the first day of listing, the stock closed at Rs 49.15, a whopping 40% premium to the issue price of Rs 35.
Canara Bank reported net profit growth of 83% and 53% to Rs 291.72 crore (Rs 2.91 billion) and Rs 711.05 crore (Rs 7.11 billion) for the third quarter and nine months ended 31 December 2002, respectively. This was mainly backed by a higher rise in other income and lower operating cost.
During the quarter ended 31 December 2002, interest income rose 6% to Rs 1654.12 crore (Rs 16.54 billion). Nearly 55% of interest income came from interest on advances/bills, while interest on investments contributed 40%. Due to low cost of deposits, interest expenses were marginally higher by 1% to Rs 1126.59 crore (Rs 11.26 billion). Thus net interest income showed a rise of 17% to Rs 527.53 crore (Rs 5.27 billion). Other income rose 36% to Rs 405.35 crore (Rs 4.05 billion), while operating expenses decreased by 1% to Rs 404.28 crore (Rs 4.04 billion). Thus operating profit recorded a 55% rise to Rs 528.60 crore (Rs 5.28 billion).
For the nine months ended 31 December 2002, net interest income climbed 27% to Rs 1606.28 crore (Rs 16.06 billion). While there was a 5% rise in interest income to Rs 4940.42 crore (Rs 49.40 billion), interest expenses fell 3% to Rs 3334.14 crore (Rs 33.34 billion). Other income grew 22% to Rs 1096.12 crore (Rs 10.96 billion). Growth momentum in income from treasury operations was sustained as profits from such operations were at Rs. 540 crore (Rs 5.4 billion), up by 40%. Operating expenses increased 2% to Rs 1226.23 crore (Rs 12.26 billion). Thus operating profit recorded a growth of 53% to Rs 1476.17 crore (Rs 14.76 billion).
Aggregate business of the bank, as on the last Friday of December 2002, moved up year-on-year (y-o-y) by 19% to reach Rs 105724 crore (Rs 1057.24 billion), comprising Rs 68150 crore (Rs 681.5 billion) under deposits and Rs 37574 crore (Rs 375.74 billion) under advances. While deposits grew by 15%, growth in advances worked out to 25%. Cost of domestic deposits declined to 6.5% from 7.2% as on 31 March 2002. Productivity, as measured by business per employee, stood at Rs 2.35 crore.
The bank continued to step up its retail operations during the year. For the nine months period ending 31 December 2002, retail disbursals aggregated to Rs 2,324 crore (Rs 23.24 billion) as against Rs 1,773 crore (Rs 17.73 billion) for the entire 2001-02. Outstanding advances under retail operations were of the order of Rs 4742 crore, which included Rs 1301 crore under direct housing and Rs 369 crore (Rs 3.69 billion) under education loans. Outstanding retail advances were 42% higher than the March 2002 level of Rs 3334 crore (Rs 33.34 billion), accounting for 13% of net credit.
Foreign business has emerged as one of the key area of operations. Foreign Business Turnover, as on 31 December 2002 amounted to Rs 47598 crore.
The bank continued its headway in the area of greater infotech application. Number of computerised branches rose further to 1694, accounting for 70% of branches and about 85% of aggregate business. ATM strength of the bank as on 31 December 2002 was 157 which is targeted to reach 250 by the end of current financial. Till 31 December 2002, 225 branches spread across 9 cities have been interconnected to offer 'Anywhere Banking' facility. The facility is to be extended to 370 branches, covering 3 additional cities by 2003.
Canara Bank lowered interest rates on domestic term deposits for the period of one year and above by 0.25%, effective from 13 January 2003. Banks have been reducing deposit rates in a bid to reduce their cost of funds in a lower interest rate regime.
After the IPO, the shareholding of the Government of India (GoI) in Canara Bank has come down to 73.2% from 100%. The bank's post-issue paid-up capital is Rs 410 crore. At the current Rs 63.15, the scrip trades at a PE multiple of 2.7 based on its nine-month April-December 2002 annualised EPS of Rs 23.10.
Bank stocks are in demand following the passing of the Securitisation Bill in Parliament in November 2002. The bill paves the way for recovery of banks' sticky loans.
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