State-owned Canara Bank is set to spin off its credit card vertical into a separate subsidiary while it has started preparing a roadmap for listing of its life insurance and fund management businesses, managing director K Satyanarayana Raju told.
Raju also said that the bank is looking to focus on retail, agriculture and MSME lending and would slow lending to corporates to maintain net interest margin above 3%. The bank is taking steps to expand low-cost deposits, thus helping improve margins and profitability.
The bank is focusing on the credit card business, which it believes can grow exponentially through cross-selling and leveraging the strength of its existing 80 million active customer base. At a market capitalization of about Rs 54,600 crore, Canara Bank is the third most-valued state-run lender after State Bank of India (SBI) and Bank of Baroda.
“That’s why we are planning a separate subsidiary for it. We can easily grow this business with a special focus,” said Raju, who took the driver’s seat in February. He was earlier executive director at the bank.
At present, it has 650,000 credit card customers with Rs 1,100 crore in outstanding portfolio. The bank’s gross loan portfolio stands at Rs 8.63 lakh crore.
The Bangalore-based lender plans either to use one of its existing subsidiaries to run the credit card business or set up a new one. Using the existing one is the first choice.
Meanwhile, the bank has advised Canara Robeco Asset Management Co and Canara HSBC Life Insurance Co to prepare a roadmap for listing in the next 15-18 months. Canara holds 51% each in the life insurance and mutual fund joint ventures.
Separately, the bank is looking to raise its stake in CanBank Computer Services to 100% from the existing 70%. It is in the process of writing to the other stakeholders of CanBank Computer, requesting them offload their holdings.
“We intend to use this existing set-up for the credit card business, after suitable modification of the company. It can be done once we own it 100%,” Raju said. “If other shareholders do not part with their stake in it, then we will have to exercise a Plan B, which is setting up a new subsidiary altogether.”
On banking business, Raju said the target for this fiscal is to maintain 13-14% growth in retail, agriculture and MSME (RAM) advances, while cutting down corporate loan growth to 13-14% as compared with last fiscal’s over 20% growth.
“The margin is better in RAM lending. We would like to make a balance in topline and bottomline growth,” the MD said.
He mentioned that mobilisation of low-cost current and savings account (CASA) suffered amid the higher interest rate regime and therefore it needs a targeted effort to correct this. The bank’s CASA ratio was at 33.5% at the end of March against a guidance of 38%. It has unveiled a few deposit products targeting young salaried professionals to garner savings as well as to increase its stake among the younger generation.