CANBK - Canara Bank Share Price

In the Q1 FY 2025-26 Earnings Conference Call held on July 24, 2025, Canara Bank management provided a promising outlook for the upcoming financial year. Here are the key points shared by Mr. Satyanarayana Raju, the Managing Director & CEO:

1. Business Growth: The bank's global business increased by 11% year-on-year, reaching an all-time high of Rs.25.63 lakh crore. Deposits grew by 10% to Rs.14.67 lakh crore, while global advances rose by 12.42%, nearing Rs.10.96 lakh crore.

2. Future Guidance: Management guided for advances growth of 10-11%, deposits growth of 9-10%, and global business growth of 10% for the financial year. They reported that growth exceeded past expectations, particularly with credit growth at approximately 12%.

3. Profit Metrics: The operating profit surged by 12.32% year-on-year to Rs.8,554 crore, while net profit increased by 21.69% to Rs.4,752 crore. The bank's Cost-to-Income Ratio improved to 46.77% from 47.55% in the previous quarter.

4. Asset Quality: The gross NPA ratio decreased to 2.69%, a 145 basis point improvement year-on-year, and net NPA dropped to 0.63%, reflecting a reduction of 61 basis points. The Provision Coverage Ratio (PCR) improved by 395 basis points to 93.17%.

5. Core Capital and Returns: The CET 1 capital increased to 12.29% from the previous year. The bank achieved a return on assets of 1.14% surpassing FY guidance of 1.05%.

6. Retail and RAM Sector Growth: Retail credit growth reached 34% year-on-year, significantly bolstered by a robust rise in housing loans (up 14%) and vehicle loans (up 22.09%). The RAM sector's contribution to the asset book has reached 58%, aligning with the bank's strategic objectives.

7. NIM and NII Outlook: The management anticipates that the current Net Interest Margin (NIM) may stabilize around 2.5%, with potential for gradual improvement in the latter half of the year if no further rate cuts occur.

8. Fee-Based Income: Fee-based income rose by 16.39% to Rs.2,223 crore, contributing positively to profitability.

The detailed outlook underscores management's confidence in sustaining business momentum while navigating the broader economic landscape effectively.

Q&A Summary of Canara Bank Q1 FY 2025-26 Earnings Call

Question 1: "Can you provide clarity on the decline in NIM for Q1 and the outlook for Q2 and Q3? Also, what's the status of PSLC income for the future?"

Answer: We maintained a NIM of 2.73 in Q4, but in Q1 it declined 17 bps due to a 100 bps pass-on of repo rate reductions. We expect NIM to stabilize around 2.5% in Q2, with gradual improvements possible in later quarters if no further rate cuts occur. Regarding PSLC, we anticipate ongoing opportunities as our PSL stands at 45.63%, and income from PSLC will continue not just this year but into the next.

Question 2: "Is the guidance on margins (270-280 bps) for exit or for the full FY26?"

Answer: Given ongoing market conditions and potential further rate cuts, maintaining the 275-280 bps margin for the full year may be challenging. We had initially set this guidance with fewer anticipated cuts, and the recent cuts will impact our ability to achieve it.

Question 3: "Why has the cost of wholesale deposits not seen a decline despite easing rates?"

Answer: The cost of existing wholesale deposits won't drop until they mature and are repriced. We maintain competitive rates for attracting deposits, and any adjustments on maturing deposits will occur gradually, impacting the overall cost of funds in Q2.

Question 4: "Can you elaborate on the exceptional provisioning of Rs.1,883 crores mentioned in the accounts?"

Answer: This refers to the Andhra Pradesh Grameen Bank (APGB), which transferred ownership in compliance with regulatory guidelines. The provisioning reflects the book value of this investment at the time of transfer.

Question 5: "What can you share about the outlook for recoveries in the coming quarters?"

Answer: We are optimistic about recoveries in Q2, having identified several significant accounts for resolution, which are expected to yield repayments soon. Our recoveries from returned accounts should be better than in the June quarter as repayments from these accounts are up.

Question 6: "Are you seeing increased pressure to provide beyond your current guidance on provisions?"

Answer: Our provisioning strategy remains conservative. While we see the potential to exceed guidance, we will maintain a prudent approach, ensuring we don't alter our targets unless necessary. The conditions seem favorable for hitting targets earlier than anticipated.

Question 7: "With respect to overall treasury operations, how do you expect performance to evolve amid potential rate cuts?"

Answer: While Q1 saw exceptional income due to OMO support leading to nearly Rs.1,993 crores in treasury income, subsequent periods will see reduced gains. But we will leverage our excess PSLC for additional income and mitigate lower treasury income impacts through existing frameworks.

Each answer is crafted to provide clarity without exceeding the character limit requested, conveying essential information within the context of the questions asked.