Canara Bank expects its mutual fund and insurance joint ventures to apply for their IPOs over the next 18 months as the other shareholders have agreed in principle to the listing plan, its managing director K Satyanarayana Raju has said. In an interview with Atmadip Ray, Raju also said the bank’s move to spin off its credit card business will help grow this business by leaps and bounds. Edited excerpts:
You earlier told ET that the bank’s management decided to list Canara HSBC Life Insurance and Canara Robeco Asset Management. How far have you progressed in this direction?
We have spoken to the other shareholders and advised the respective management in these subsidiaries to prepare a road map for listing. The other shareholders and the respective boards have in principle agreed to the plan. These companies may be ready to apply for their initial public offers (IPO) in the next 15 to 18 months. Canara Bank holds 51% each in these subsidiaries. (HSBC holds 26% and Punjab National Bank 23% in the life insurance joint venture while Japan’s Orix Cor holds 49% in the asset managementJV.)
You have decided to hive off your credit card business and that would involve another subsidiary. What is the thinking behind this move?
We want to hive off our credit card business, which can grow exponentially if we can take a very focused approach. We have around 620,000 cardholders, which is nothing compared to the bank’s 8 million-strong customer base. This means we can grow our credit card business by leaps and bounds if we can leverage the existing customer base and cross-sell the product to them. To do this, we are planning to transfer the credit card vertical into a subsidiary so that more attention can be given to this. We have identified Canbank Computer Services for this. Canara Bank holds about 70% in the subsidiary while Bank of Baroda and two other private banks together hold about 30%. We intend to buy out the remaining shares so that it becomes a wholly owned subsidiary. This would then allow us to use it for the credit card business. We have written to all three shareholders – Bank of Baroda, DBS Bank and Karur Vysya Bank. BoB and DBS have in principle agreed to our proposal to buy the remaining stake. Negotiations with KVB are on.
Canara Bank reported a robust set of numbers for the first quarter. Is there any area which needs attention?
Our CASA (current and savings account) ratio is low. We are taking specific efforts to improve it to 35% by the end of March 2024 from 33% at present. It’s a huge challenge in a high-interest rate regime. However, I am happy to share that we have seen some positive results since we launched our salary account campaign in April. We have written to about 5,000 companies to open salary accounts with us for their employees. In the past three-and-a-half months, we could open 310,000 salary accounts . These accounts now have a total of ₹1,100 crore as outstanding balance. The total number of salary accounts is around 1.4 million with around ₹6,000 crore balance. We have also started the relationship manager concept for customers in the top 5,000 branches. This will also support our CASA drive.
Net interest margin improved to 3.05% at the end of June from 2.95% in March. Does it give you comfort in a high-interest rate regime?
We have given guidance of 3.05% NIM for FY24. In that sense, we are in line. However, there will be stress on the margin due to the lagged effect of higher deposit rates. Our CASA drive will offset this a bit. On the asset side, we expect interest rates to stabilise at the current level for at least two to four quarters. So, yield on advances will be maintained. Our average yield is 8.43%, the highest in the last several quarters.