Bangalore: Bangalore-based Vijaya Bank posted a 2.9% rise in its second quarter earnings on the back of muted growth in advances, even as its net interest income fell and net interest margin remained static.
The bank’s net profit for the July-September quarter grew to Rs105.25 crore, from Rs102.33 crore in the same period a year-ago. The lender’s net interest income fell to Rs219 crore from Rs259 crore. Net interest margin remained at 2.61% for the quarter.
On Wednesday, the bank’s stock fell 0.5% on the Bombay Stock Exchange (BSE) to close at Rs59.40. “Credit did not grow as expected, so we had a setback,” Vijaya Bank’s chairman and managing director Prakash Mallya said. “Costs of deposits have also gone up.”
Interest income from advances rose more than 43% to Rs964.41 crore. Capital adequacy ratio (CAR) decreased to 11.28% from 11.88% in the year-ago quarter.
On adoption of global banking norms known as Basel II, the bank said its CAR would be further affected by 50-60 basis points.
An analyst with a Mumbai-based brokerage house who did not want to be identified said that the results were disappointing in terms of high cost of funds. Retail term deposits have been repriced at a higher level. “The second half of the year will be better than the first half,” he said. “Overall costs should come down, which would lead to a better-to-stable net interest margin.”
Mallya, however, said he expects “good growth” in the bank’s net interest income and net interest margin in the third quarter. For 2007-08, the bank expects to post total business of Rs76,000 crore.
The bank, which had recently pulled out of an insurance joint venture that it had with Punjab National Bank and Principal Financial Group of the US, is planning to float an insurance company on its own by December.
The bank currently has 988 branches and hopes to increase its network to 1,050 branches by March 2008.