canara bank presentation nov2010
TRANSCRIPT
November 2010
TOGETHER WE CANo e be 0 0
Page 1www.canarabank.com
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CANARA BANK AT A GLANCECANARA BANK AT A GLANCE
3rd largest public sector bank in terms of domestic business
Among the top 5 public sector banks in terms of assets
6 months ending Sep 2010 INR bn US$mm
Net-interest income 37 3 829Among the top 5 public sector banks in terms of assets
Consistent track record of profitability since establishment 105 years ago
Leading lender to the infrastr ct re sector benefitting from
Net interest income 37.3 829
Net profit 20.2 449
Total assets 2,828 62,836
Net advances 1,761 39,127Leading lender to the infrastructure sector benefitting from India’s economic growth
Pan-India network of over 3,000 branches and over 2,000 ATMs serving over 37 million clients
Net advances 1,761 39,127
Total deposits 2,492 55,375
Total equity 167 3,707
Market Cap (Nov 17, 2010) 319 7,098 g
Technology focused bank with 100% coverage of branches under Core Banking System
Subsidiaries, joint ventures and associates in non-traditional
a et Cap ( o , 0 0) 3 9 ,098
Key ratios
Net-Interest margin 3.16%
Cost/Income ratio 41 6%, jbanking, including insurance and asset management
One of the highest Government shareholding amongst public sector banks at 73.2%1
Cost/Income ratio 41.6%
Net NPA ratio 1.06%
Tier I ratio 8.82%
Return on avg assets 1 52%
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Source: Company filingsNote: US$1:INR45; 1 As of September 2010
Return on avg. assets 1.52%
Return on equity 29.8%
BUSINESS PROFILEBUSINESS PROFILE
Corporate SME Retail Oth B iCorporateBanking
SMEBanking
RetailBanking Other Businesses
Full service offering to large and mid i d i
Comprises mainly of priority sector lending
ll l
Includes housing, vehicle, personal and
d i l lf
Agricultural lending and consultancy
isized corporations across India including project and corporate finance, working capital, short-term
to small-scale industriesOver 445,950 customers serviced through 42
education loans, self-employed and corporate employee loans, deposits, credit and debit
services, international banking, bancassurance, sale of mutual fund products, depositarycapital, short term
credit, cash management and treasury productsInfrastructure loans1
through 42 specialized branches and 15 centralized processing centersPriority sector loans
credit and debit cards, and services to non-resident IndiansHousing loans
products, depositary participant services, merchant banking and executor, trustee and taxation related
witnessed 63.4% y-o-y growth to reach INR395bn as of Sep 2010
ywere INR259bn and non-priority sector loans were INR69bn as of Sep 2010
witnessed y-o-y growth at 41.8% and constitute 44.8% of retail loan book
services
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1 30% of which are short term in nature
KEY SUBSIDIARIES AND ASSOCIATESKEY SUBSIDIARIES AND ASSOCIATES
Factoring Can Fin HomesInsurance Asset Management Factoring Can Fin Homes
One of the leading factoring companies in India in terms of
Engaged in housing finance, listed on BSE with market
Insurance
Joint venture with HSBC Insurance and Oriental Bank of
Asset Management
Joint venture with the Netherlands based Robeco Groep N.V., a
total turnoverBusiness turnover at INR37.4bn for FY10 and INR18.6bn for 6 months ended Sep
capitalization of INR2.8bn1
Canara Bank holds 42.4% stakeServices more than
CommerceAmong the top ten of 22 private life insurers in FY10 in terms of new business
subsidiary of Rabobank, which holds 49% stakeAuM of INR77.2bn as p
2010Also provides other services, such as invoice discounting and export factoring
Services more than 175,000 families2
Cumulatively sanctioned housing finance of INR62bn
ith di b t
premiumsFastest to receive INR10bn (in 23 months) of weighted new business
of Sep 2010Reached break even with net profit of INR62.3mm for FY10
Other subsidiaries, associates and joint ventures include Canara Bank Securities, Canbank Financial Services, Canbank Venture Capital, Commercial Bank of India LLC, CARE India Ltd., Commonwealth Trust (India) Ltd. and Canbank Computer S i
and export factoring with disbursements above INR53bn2
new business premiums
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Services
Source: Company filings; Note: FY indicates fiscal year ended March 31st; BSE indicates Bombay Stock Exchange; 1 As of November 17, 2010 2 As of year ended March 31, 2010
CANARA BANK: KEY STRENGTHSCANARA BANK: KEY STRENGTHS
Delivering balance sheet growth without compromising margins 2
Reputation as a customer centric bank1
Thrust on asset quality3
Pan-India presence with focus on developed regions of India4 Pan India presence with focus on developed regions of India
Emphasis on cost control and productivity5
Benefitting from significant investment in technology6
4
Benefitting from significant investment in technology6
Diversified sources of income through increased initiatives7
Insulated investment profile with consistent yields8
Sound capital position and high government ownership9
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Profitable since inception with meaningful returns to stakeholders10
CUSTOMER CENTRIC BANKCUSTOMER CENTRIC BANK
Emphasis on customer serviceSpecialized touch points for each customer category
Customers (mm)132 specialized service branches
10 prime corporate branches, 3 stock
exchange branches17 overseas branches
32.4 34.8 37.3 37.5
20.030.040.050.0
exchange branches,7 asset recovery
management branches
branches, 10 agri-finance
branches
Customertouchpoints
0.010.0
FY08 FY09 FY10 H1FY11
Key initiatives
33 extension counters to service retail depositors at
places such as factories or
3 capital markets branches, 3 Mahila banking branches
points y
‘Best in class’ counter service
Superior customer relationship management
Marketing through well trained front office staff and a strong ‘feet on street’ sales forcefactories or
universities
1 consumer finance branch and 1 housing finance branch
strong feet on street sales force
Continuous efforts to build brand awareness
S C
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Source: Company
DELIVERING BALANCE SHEET GROWTH…DELIVERING BALANCE SHEET GROWTH…High proportion of deposits in funding mix
2,4922 3472 5003,000Deposits (INR bn)
Steady growth in advances
3,000Advances (INRbn)
2,3471,869
1,541
5001,0001,5002,0002,500
1,0721,382
1,693 1,761
5001,0001,5002,0002,500
Increasing emphasis on CASA deposits
0FY08 FY09 FY10 H1FY11
Source: Company filings; Note: FY indicates fiscal year ended March 31st
0FY08 FY09 FY10 H1FY11
Source: Company filings; Note: FY indicates fiscal year ended March 31st
Corporate lending remains key
Savings 22%Retail
13%
Agriculture 11%
Others 1%
Current7%
Fixed 71%
SME15%
Corporate 60%
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Total = INR2,492bnSource: Company filingsNote: Current and savings accounts (“CASA”) account for 30% of domestic deposits
Total = INR1,761bnSource: Company filings
…WITHOUT COMPROMISING MARGINS …WITHOUT COMPROMISING MARGINS Strong growth in net interest income … … and increasing NIMs (%)
56 860 0 3 5%
INR bn
35 4
47.2
56.8
37.340.0
50.0
60.0
2.42%
2.78% 2.80%
3.16%
2.5%
3.0%
3.5%
35.4
20.0
30.0
1.0%
1.5%
2.0%
0.0
10.0
FY08 FY09 FY10 H1FY110.0%
0.5%
FY08 FY09 FY10 H1FY11
Source: Company filings; Note: FY indicates fiscal year ended March 31st
Savings campaigns to emphasize retail businessIncreased emphasis on low-cost CASA deposits
Source: Company filings; Note: FY indicates fiscal year ended March 31st
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Base rate regime protects margins
THRUST ON ASSET QUALITYTHRUST ON ASSET QUALITY… with decreasing ratios
2.0% Gross NPL Ratio Net NPL Ratio
Non-performing assets remain manageable …
40.0 Gross NPLs Net NPLs (INR bn)
1.18%
1.56% 1.52% 1.49%
1.06%1.06%1.09%1.2%
1.6%
21.7
25.9 26.430.0
0.84%
0 4%
0.8%15.112.7
18.618.0
9.010.0
20.0
0.0%
0.4%
FY08 FY09 FY10 H1FY110.0
FY08 FY09 FY10 H1FY11
One of the highest provision coverage ratios amongst public sector banks at 77.1% as of Sep 2010Minimal exposure to commercial real estate, microfinance and capital markets
Source: Company filings; Note: FY indicates fiscal year ended March 31st Source: Company filings; Note: FY indicates fiscal year ended March 31st
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p , pFocus on recoveries through asset recovery branches, Can Adalats and Lok AdalatsRobust credit approval and risk management policies
PAN INDIA PRESENCEPAN INDIA PRESENCESignificant growth in branches1 and ATMs
Branches(Nos) ATMs(Nos)Jammu &
Kashmir (11) States with 100 or more branchesStates with 50 99 branches
Well spread network of branches
2,679 2,733
3,047 3,066
2 500
3,000
3,500
Arunachal Pradesh
A (21)
Himachal Pradesh(19)
Sikkim (2)Uttar Pradesh
Delhi (124)
Punjab (119)Haryana
(90)
Uttarkhand(30)
Chandigarh (14)
States with 50-99 branchesStates with <50 branches
Figures in ( ) indicate # of branches
2,006 2,019 2,017 2,017
1,500
2,000
2,500 Assam (21)
Gujarat (66)
M h ht
ManipurMeghalaya
(3)
Mizoram
Nagaland
Orissa(53)
Rajasthan (44)
Tripura (2)WestBengal
(93)
(232) Bihar (100)
Madhya Pradesh(51) Chattisgarh
(11)
Jharkhand(55)
500
1,000
Goa (25)
Karnataka
Maharashtra(232)
( )
AndhraPradesh (213)
Dadra & Nagar Haveli
(2)
0FY08 FY09 FY10 H1FY11
Source: Company filings; Note: FY indicates fiscal year ended March 31st
1 Includes overseas branches
Karnataka(619)
Kerala(281)
Tamilnadu(544)
Pondicherry (5)
Lakshadweep
Andaman and Nicobar Islands (1)
Thrust on organic growth
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g gFocus on alternate channels such as internet bankingPlans to expand ATM network Launch of mobile banking shortly
COST CONTROL AND PRODUCTIVITYCOST CONTROL AND PRODUCTIVITYOne of the most efficient … … and productive public sector banks
Cost to income ratio (%) Business per branch Profit per employeeINR mm INR mm
48.5%
43.6%45.0%
50.0%
78
98106
100
120
1.0
1.2
40.7%41.6%
40.0%61
78
60
80
0.6
0.8
35.0%20
40
0.2
0.4
30.0%FY08 FY09 FY10 H1FY11
Source: Company filings; Note: FY indicates financial year ending March 31st
0FY08 FY09 FY10 H1FY11
0.0
Source: Company filings; Note: FY indicates financial year ending March 31st; Business defined as sum of advances and deposits
Emphasis on hiring training and retaining top talent
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Emphasis on hiring, training and retaining top talentCentralized processing of back office functionsCost effective resource mobilization programControl on operating expenses
BENEFITTING FROM INVESTMENT IN TECHNOLOGYBENEFITTING FROM INVESTMENT IN TECHNOLOGY
100 % Core Banking System integrated with solutions such as:
Internet banking
Customer relationship management
Securities trading
Real Time Gross Settlement System and National Electronic Funds Transfer enabled at all branches
Data centre in Bangalore and a disaster recovery centre in Mumbai
Taken steps to initiate a data warehouse for credit risk managementmanagement
Aiming to have the best technology among public sector banks
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DIVERSIFIED SOURCES OF INCOMEDIVERSIFIED SOURCES OF INCOMEDelivering strong growth in non-interest income Non-interest income–breakdown (% as of H1FY11)
Fees Other incomeFees
Other 12.5%INR bn
25
30
35
40 56.5%
Profit from foreign exchange
Dividend income6.1%
22.1 23.1
28.6
11.7 12.2 14.0
10.4 10.914.6
5.35
10
15
20
Profit from sale of investments
13 0%
g gtransactions
11.8%12.3
7.00
5
FY08 FY09 FY10 H1FY11
13.0%
Total = INR12.3bn
Source: Company filings; Note: FY indicates fiscal year ended March 31st Source: Company filings
Cross selling of insurance, on-line trading services and mutual fund products through 2,596 branches
Increasing traditional fee based services – Transactional Banking, Letter of Credit, Guarantees, funds transfer etc
Increasing thrust on foreign exchange transaction related activities
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Increasing thrust on foreign exchange transaction related activities
INSULATED INVESTMENT PORTFOLIOINSULATED INVESTMENT PORTFOLIO
Stable yield profile
9.0%
Majority of investments in Government securities
6 months ended Sep 2010 INR
bn% of total
7.61%7.52%7.94%7.89%
6 0%
7.0%
8.0%Government securities 650 84.3%Shares 11 1.4%Debentures and bonds 21 2.8%Subsidiaries and/or joint ventures 5 0 7%
4.0%
5.0%
6.0%
Portfolio is not speculative in nature
Subsidiaries and/or joint ventures 5 0.7%Others 84 10.9%Total 772 100.0%
1 0%
2.0%
3.0%
p
6 months ended Sep 2010 INR
bn% of total
Held to maturity 614 79.6%A il bl f l 154 20 0%
0.0%
1.0%
FY08 FY09 FY10 H1FY11Source: Company filings; Note: FY indicates fiscal year ended March 31st
Available for sale 154 20.0%Held for trading 4 0.4%Total 772 100% Source: Company filings
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SOUND CAPITAL POSITIONSOUND CAPITAL POSITIONHealthy Tier 1 ratio Large government stake provides flexibility
8 0% 8.5% 8.8%10.0% Mutual Funds7.0%
8.0%
2.0%4.0%6.0%8.0%
Foreign
Insurance Companies
7%
& others 9%
Stable CAR
0.0%FY08 FY09 FY10 H1FY11
Source: Company filings; Note: Financial year ending March 31st
InstitutionInvestors
11%
Stab e C
Government of India 73%13.3%
14.1%13.4%
13.9%
13 0%14.0%15.0%
10.0%11.0%12.0%13.0%
FY08 FY09 FY10 H1FY11
Not raised equity since IPO in November 2002
Low foreign institutional holding provides capital flexibility
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FY08 FY09 FY10 H1FY11Proposed Basel III norms require banks to enhance core capitalSource: Company filings; Note: Financial year ending March 31st
DELIVERED MEANINGFULDELIVERED MEANINGFULRETURNS TO SHAREHOLDERSRETURNS TO SHAREHOLDERS
Book value per share (INR) Earnings per share (INR)
245306 355
300400
5174
496080
¹202 245
0100200300
FY08 FY09 FY10 H1FY11
3851 49
0204060
FY08 FY09 FY10 H1FY11
Return on equity (%)Dividends per share (INR)
10.012.029 8%
40.0%8.0 8.0
2.04.06.08.0
10.0
19.1% 22.6%26.8% 29.8%
10.0%
20.0%
30.0%
0.0FY08 FY09 FY10
0.0%FY08 FY09 FY10 H1FY11
Profitable since inception
Delivered net profit of over Rs10bn per quarter for the last 2 quarters for the first time in the history of the Bank
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Delivered net profit of over Rs10bn per quarter for the last 2 quarters for the first time in the history of the BankSource: Company filings; Note: Financial year ending March 31st; 1 Not annualized
BUSINESS STRATEGYBUSINESS STRATEGY
Focus on leveraging technology for improved customer service and b i thbusiness growth
Reposition the Bank's brand to attract young generation through effective use of e- channels and branch transformation models
Focus on growth through expansion of domestic delivery channels
Increase international footprint and thereby enhance the share of overseas business in total business of the bankbusiness in total business of the bank
Greater thrust on improving fee based income through cross selling of financial products & services and through ancillary business
Leverage the Bank’s Subsidiaries to emerge as a Financial Super market
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INDIA: HIGH GROWTH ECONOMYINDIA: HIGH GROWTH ECONOMY
2 3202,6203,00010.0%12.0%
One of the fastest growing economies GDP per capita to double to US$ 2,620 by 2015
Real GDP growth (%)
1,340 1,5201,750
2,320
1,110
2,020
0500
1,0001,5002,0002,5008.5%
7.3%6.2%
5.2% 4.3% 3.9% 3.2%
0.0%2.0%4.0%6.0%8.0%
10.0%
High savings rate as a % of GDP
02009 2010 2011F 2012F 2013F 2014F 2015FChina India Brazil Malaysia Korea Thailand Russia South
Africa
Source: Moody’s country credit statistics, 2010Note: Data for India for year ending Mar 2011
Source: EIU; Note: Denotes year ended March
Steady increase in foreign reserves High savings rate as a % of GDP
30.8%34.0% 36.1% 34.3%35.6%
29.5%
25.0%30.0%35.0%40.0%
Steady c ease o e g ese es
145
259241
299
192200250300350US$ bn
0.0%5.0%
10.0%15.0%20.0%
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
136145
050
100150200
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
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Source: Moody’s country credit statistics Source: Moody’s country credit statistics, 2010
INDIA: GROWTH UNDERPINNEDINDIA: GROWTH UNDERPINNEDBY STRONG FUNDAMENTALSBY STRONG FUNDAMENTALS
Increasing consuming/producing age group
years Population mn
654565+ 2000
2015
Increasing inflation rate (%)
12.6%
9.2%10 0%12.0%14.0%
372
819
65
361
604
Under 15
15 - 64
65+ 2015
4.2%7.0% 6.6%
3.6%
0.0%2.0%4.0%6.0%8.0%
10.0%
M 0 M 06 M 0 M 08 M 09 M 10
Source: Vision 2020, Planning Commission
Robust private consumption growth Increasing number of billion dollar companies
0 200 400 600 800 1000Source: Moody’s country credit statistics
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
200
250
> US$ 10 bn US$ 5 bn - US$ 10 bnUS$ 2 bn - US$ 5 bn US$ 1 bn - US$ 2 bn
1 190 1,3201,480
1,6501 500
2,000
Personal disposable income per head (US$)Private consumption per head (US$)
p p g g p
70 106 121 174 92 191 202
No. of companies in terms of market capitalisation
CAGR FY10 –FY15 11%
0
50100
150928 1,080 1,190 1,320
637 746 808 897 997 1,110
0
500
1,000
1,500
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Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-102009 2010 2011F 2012F 2013F 2014F
Source: FactsetNumber of companies with market capitalisation of US$ 1 bn or more
Sep-10
Source: EIU; Note: Denotes year ended March
INDIA BANKING SECTOR REMAINSINDIA BANKING SECTOR REMAINSUNDERPENETRATEDUNDERPENETRATED
… With room for further growth
0% %
Indian banking sector is growing exponentially…
928
50 000
Advances DepositsINRbn
Ad CAGR 21%
Domestic credit to GDP (%)
170
166
148%
138%
1%
140%
160%
180%
,009
70 32,4
48
40,6
32
33,2
01
44, 9
40,000
50,000 Advances CAGR–21%Deposits CAGR–20%
11
87%
59%
60%
80%
100%
120%
19,8
12 24,7
69 30,
26,9
7
5,16
8
3
21,6
47
20,000
30,000
5
34%
0%
20%
40%
60%15
0
10,000
0%
Kor
ea
Sou
th A
frica
Chi
na
Mal
ayas
ia
Thai
land
Indi
a
Bra
zil
Rus
sia
0
Mar
-06
Mar
-07
Mar
-08
Mar
-09
Mar
-10
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Source: Moody’s country credit statistics, 2010Note: Data for India as of Mar 2010
Source: RBI–Report on trends and progress in banking sector
SUMMARY FINANCIALSSUMMARY FINANCIALSProfit & Loss (INR mm)
H1FY11 H1FY10 FY10 FY09 FY08 H1FY11 H1FY10 FY10 FY09 FY08
Net Interest Income 37,311 26,052 56,805 47,178 35,378
Other Income 12 336 13 665 28 579 23 112 22 129Other Income 12,336 13,665 28,579 23,112 22,129
Operating Exp 20,656 17,212 34,776 30,652 27,913
Pre provisioning profits 28,991 22,505 50,608 39,638 29,594
Provisioning and tax 8,778 7,846 20,394 18,914 13,944
Net Profit 20,213 14,659 30,214 20,724 15,650
Source: Company filings; Note: FY indicates financial year ending March
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SUMMARY FINANCIALSSUMMARY FINANCIALSBalance Sheet (INR mm)
H1FY11 H1FY10 FY10 FY09 FY08Capital And Liabilities pCapital 4,100 4,100 4,100 4,100 4,100 Reserves and surplus 162,706 132,360 142,618 117,978 100,905 Deposits 2,491,865 2,051,625 2,346,514 1,868,925 1,540,724 B i 109 485 87 334 84 406 140 009 25 172Borrowings 109,485 87,334 84,406 140,009 25,172 Other liabilities and provisions 59,466 72,123 69,773 65,446 134,386 Total 2,827,622 2,347,542 2,647,411 2,196,458 1,805,287
Assets Cash & balances with RBI 177,866 137,746 157,195 100,368 133,648 Balances with banks, money at call etc. 53,369 34,066 39,338 66,230 44,726 Investments 771 835 650 039 696 770 577 769 498 116Investments 771,835 650,039 696,770 577,769 498,116 Advances 1,760,711 1,464,556 1,693,346 1,382,194 1,072,380 Fixed assets 28,278 28,709 28,594 29,295 29,169 Other assets 35,564 32,426 32,168 40,602 27,248
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Total 2,827,622 2,347,542 2,647,411 2,196,458 1,805,287 Source: Company filings; Note: FY indicates financial year ending March
CANARA BANK: KEY RATIOSCANARA BANK: KEY RATIOSAT A GLANCEAT A GLANCE
Financial highlights
H1FY11 FY10Net profit growth 37.9% 45.8%Net profit growth 37.9% 45.8%Net-interest income growth 43.2% 20.4%Net advances growth 20.2% 22.5%Total deposits growth 21.5% 25.6%Provisioning coverage ratio 77 1% 77 7%Provisioning coverage ratio 77.1% 77.7%Cost/Income ratio 41.6% 40.7%Gross NPA ratio 1.49% 1.52%Net NPA ratio 1.06% 1.06%Tier I ratio 8.82% 8.54%Net advances / total deposits 70.7% 72.2%Net-Interest margin 3.16% 2.80%Return on avg. assets 1.52% 1.30%Return on equity 29.8% 26.80%CAR 13.88% 13.43%CASA ratio 28.9% 29.9%
Source: Company filings; Note: FY indicates fiscal year ended March 31st
Note: Domestic CASA ratio at 30 1% as of Sep 10
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Note: Domestic CASA ratio at 30.1% as of Sep-10