Mumbai: Canara Bank, India’s third-biggest by assets, said first-quarter profit rose 26% as companies and farmers borrowed more in an economy that’s estimated to grow 9% this fiscal year.
Net income rose to Rs2.41 billion ($60 million) in the three months ended 30 June from Rs1.91 billion a year earlier, the bank said in a statement to the Bombay Stock Exchange (BSE). The profit is lower than the Rs2.5 billion median estimate of three analysts surveyed by Bloomberg.
“Demand from manufacturing and infrastructure sectors is driving growth of banks,” its chairman M.B.N. Rao told reporters in Bangalore. “Our growth is also being driven by demand from agriculture and small and medium enterprises.” The Bangalore-based bank is expanding credit to farmers and small and medium sized companies as the government puts more focus on the rural economy.
The Indian government wants to increase agricultural production growth to 4% to boost economic expansion.
Interest and non-interest income combined increased 37% to Rs37.6 billion from Rs27.5 billion, the bank said. Non-interest income rose to Rs3.8 billion from Rs2.43 billion.
Canara Bank shares fell 4.8% to Rs273.15 on BSE on Wednesday. They’ve shed 1% since 1 January, compared with a 14% gain in the benchmark Sensitive Index.
Net interest margin, or the difference between what it earned on loans and paid on deposits, fell to 2.54% in the quarter to June 30 from 3.15% as the cost of deposits rose.
Loans increased by 18% to Rs947 billion from Rs803 billion. Deposits grew 16% to Rs1.43 trillion. The bank plans to increase lending by 22% during the year to Rs1.2 trillion by March, Rao had said on 2 May.