Post by bhumika on Jun 12, 2006 19:21:46 GMT 5.5
Corporation Bank will emerge as one-stop financial shop in 20 months'
A.J. Vinayak
MR B. SAMBAMURTHY
Mangalore , June 11
Corporation Bank, which recently celebrated 100 years of existence, has drawn plans to take advantage of its core strengths for business growth.
While expansion in Tier II and Tier III cities and presence abroad through representative offices are on the cards, the bank also envisages having some strategic alliances along the value chain to emerge as a one-stop financial shop.
Mr B. Sambamurthy, Chairman and Managing Director, spoke to Business Line about the bank's plans and strengths. Excerpts:
What are the bank's plans for expansion?
We have good presence in Tier I and Tier II cities, and plan to open branches in Tier II and Tier III citiesWe are in position to leverage on the brand image of the 100-year-old bank, excellent network of branches, extensive adoption of IT, and new initiatives in marketing, and thereby accelerate the growth. Our market share is around 1.57 per cent as of March 31 and we are confident of improving it during the current fiscal.
Is there any plan to invest in a domestic bank?
If a good proposition comes, we are ready for that. Nothing has come so far.
Much more than that, I think we need to forge some strategic alliances along the value chain, where we have more for commercial banking, insurance and investment banking so that we will be able to provide a one-stop financial shop. We want to emerge as a one-stop financial shop within 20 months.
When the economy grew at eight per cent and credit at 30 per cent, why did growth in profits remain low?
The net profit of the bank for 2005-06 was Rs 444.46 crore against Rs 402.16 crore for 2004-05, recording a growth of 10.52 per cent. The rising cost of funds due to expectation of higher interest on deposits by depositors and the decline in yields on investments and advances have affected the interest spread and the bottom line.
Why is Corporation Bank's exposure to commodities still low at Rs 335.42 crore?
Participation of banks in the commodities market, apart from ensuring liquidity to the commodities, will aid in better price discovery. The bank has embarked upon taking further exposures in the commodities.
We expect to end this fiscal with relatively higher exposure. We intend to extend suitable credit facilities to the members of MCX and NCDEX, both fund-based and non-fund based.
We are working on it.
What is happening on the housing loan front?
The housing loan portfolio of the bank is growing. In 2005-06, it increased by Rs 98 crore. Will there be any hike in housing loan interest rates?
As of now, we do not foresee any increase.
Is there any plan to raise fresh capital?
At present the shareholding of the Government of India in the bank is 57.17 per cent. Hence, there is marginal scope for raising equity capital, without reducing the Government's shareholding below 51 per cent. However, the bank has adequate headroom available for raising Tier II bonds as well as hybrid debt Instruments.
What are the plans for implementing real-time gross settlement (RTGS) system? How is the response to this?
The bank started RTGS in May 15, 2004 and customer transactions were routed from December 2004. We have enabled 540 branches and extension counters, which are under core banking environment. There is good response and demand for the service. Corporates and elite customers are aware of the facility and are demanding the service.
What are the bank's overseas plans?
The bank's international foray is intended to capture the business opportunities with existing and prospective clients by catering to their overseas needs. The bank has decided to set up representative offices at Dubai, and later at Hong Kong, London, and New York. We have received approval from the Reserve Bank of India for opening a representative office at Dubai while the proposal pertaining to Hong Kong is under consideration. Will credit growth continue at 30 per cent for the banking system this year?
The growth may be less than what was achieved during the last year. Credit growth, however, is driven by an investment demand, improved business confidence, higher expected growth and strong economic fundamentals, which still appears to be favourable. Rise in interest rates will affect the momentum of credit offtake to a certain extent
A.J. Vinayak
MR B. SAMBAMURTHY
Mangalore , June 11
Corporation Bank, which recently celebrated 100 years of existence, has drawn plans to take advantage of its core strengths for business growth.
While expansion in Tier II and Tier III cities and presence abroad through representative offices are on the cards, the bank also envisages having some strategic alliances along the value chain to emerge as a one-stop financial shop.
Mr B. Sambamurthy, Chairman and Managing Director, spoke to Business Line about the bank's plans and strengths. Excerpts:
What are the bank's plans for expansion?
We have good presence in Tier I and Tier II cities, and plan to open branches in Tier II and Tier III citiesWe are in position to leverage on the brand image of the 100-year-old bank, excellent network of branches, extensive adoption of IT, and new initiatives in marketing, and thereby accelerate the growth. Our market share is around 1.57 per cent as of March 31 and we are confident of improving it during the current fiscal.
Is there any plan to invest in a domestic bank?
If a good proposition comes, we are ready for that. Nothing has come so far.
Much more than that, I think we need to forge some strategic alliances along the value chain, where we have more for commercial banking, insurance and investment banking so that we will be able to provide a one-stop financial shop. We want to emerge as a one-stop financial shop within 20 months.
When the economy grew at eight per cent and credit at 30 per cent, why did growth in profits remain low?
The net profit of the bank for 2005-06 was Rs 444.46 crore against Rs 402.16 crore for 2004-05, recording a growth of 10.52 per cent. The rising cost of funds due to expectation of higher interest on deposits by depositors and the decline in yields on investments and advances have affected the interest spread and the bottom line.
Why is Corporation Bank's exposure to commodities still low at Rs 335.42 crore?
Participation of banks in the commodities market, apart from ensuring liquidity to the commodities, will aid in better price discovery. The bank has embarked upon taking further exposures in the commodities.
We expect to end this fiscal with relatively higher exposure. We intend to extend suitable credit facilities to the members of MCX and NCDEX, both fund-based and non-fund based.
We are working on it.
What is happening on the housing loan front?
The housing loan portfolio of the bank is growing. In 2005-06, it increased by Rs 98 crore. Will there be any hike in housing loan interest rates?
As of now, we do not foresee any increase.
Is there any plan to raise fresh capital?
At present the shareholding of the Government of India in the bank is 57.17 per cent. Hence, there is marginal scope for raising equity capital, without reducing the Government's shareholding below 51 per cent. However, the bank has adequate headroom available for raising Tier II bonds as well as hybrid debt Instruments.
What are the plans for implementing real-time gross settlement (RTGS) system? How is the response to this?
The bank started RTGS in May 15, 2004 and customer transactions were routed from December 2004. We have enabled 540 branches and extension counters, which are under core banking environment. There is good response and demand for the service. Corporates and elite customers are aware of the facility and are demanding the service.
What are the bank's overseas plans?
The bank's international foray is intended to capture the business opportunities with existing and prospective clients by catering to their overseas needs. The bank has decided to set up representative offices at Dubai, and later at Hong Kong, London, and New York. We have received approval from the Reserve Bank of India for opening a representative office at Dubai while the proposal pertaining to Hong Kong is under consideration. Will credit growth continue at 30 per cent for the banking system this year?
The growth may be less than what was achieved during the last year. Credit growth, however, is driven by an investment demand, improved business confidence, higher expected growth and strong economic fundamentals, which still appears to be favourable. Rise in interest rates will affect the momentum of credit offtake to a certain extent