Canara Bank net down on higher interest costs

Canara Bank net down on higher interest costs

Mumbai: State-run Bank of Baroda on Wednesday reported higher net profit in April-June aided by strong growth in net interest income and fee-based earnings, but its peer Canara Bank saw profit declining due to higher interest cost.

Canara Bank, which witnessed a 28% decrease in net profit due to higher interest costs, said interest expended increased to Rs5,388 crore, from Rs3,433 crore a year-ago.

Banks have seen an increase in high-cost term deposits due to higher deposits rates.

The RBI also cut its forecast for banks’ credit growth to 18% from the previous 19%.

Lower credit off take is likely to hurt banks saddled with higher deposits. Banks’ asset quality could also come under pressure due to rising interest rates.

However, Bank of Baroda, which saw a net profit growth of 20.2%, said it is comfortable as far as its asset quality is concerned.

“Asset quality remains robust for our bank," said M. D. Mallya, chairman and managing director.

The lender’s net non-performing assets as on 30 June stood at 0.44%, marginally higher than 0.39% a year-ago.

“They do not have asset quality issue and hence can focus on credit growth, while some banks have shifted focus from growth to maintaining asset quality," an analyst with a local brokerage who did not wish to be named said.

Bank of Baroda saw its net interest income grow 23.6% to Rs1,858 crore during the June quarter.

Canara Bank shares closed 3.39% lower at Rs496.10, while Bank of Baroda shares were down 2.6% at Rs875.45 in a weak Mumbai market.