Canara Bank’s net profit grew 10.5% year-on-year to Rs 3,905 crore for the quarter ended 30 June on the back of strong growth in credit,  recoveries  and non-interest income.  

The state-run bank improved its asset quality amid decline in bad loans. The recoveries from written-off accounts grew 45.48 % over the previous year to Rs 1,158 crore.

NII

Net interest income (NII) during the reporting quarter increased 6% year-on-year to Rs 9,166 crore compared to Rs 8,666 crore a year ago. Sequentially, NII declined by 4.32% from Rs 9,580 crore.

NIM

Net interest margin (NIM), however, declined to 2.9% in the quarter under review, from 3.05% both in the last year period and the preceding March quarter.

“We are focused on credit cost by reducing slippages and maintaining the quality of recoveries. All these things are helping us maintain NIM at around 3%. The incremental cost of deposits has risen but we expect margins to settle at 3% in FY25,” said Canara Bank managing director and chief executive officer K Satyanarayana Raju.

Non-interest income

Non-interest income rose 10.38% year-on-year to Rs 5,319 crore. Sequentially it rose marginally from Rs 5,217 crore in Q4FY24. Fee-based income climbed 16.75% to Rs 1,910 crore over the previous year. Commissions and exchanges rose 34.2 % to Rs 353 crore over the previous year. However, treasury income fell 6.16 % to Rs 503 crore.

Asset quality

The bank’s gross non-performing assets (NPAs) fell to 4.14% in the June quarter, compared with 5.15% a year ago and 4.23% in the preceding quarter.

Net NPAs fell to 1.24% in the reporting period, from 1.27% in the March quarter and 1.57% in the year-ago quarter.

Provisions

The lender’s provisions for NPAs declined from Rs 2,417.6 crore in Q1 of FY24 to Rs 2,170.8 crore in Q1 of FY25. Sequentially, it fell marginally from Rs 2,279.8 crore in Q4FY24.

The bank has made a provision of Rs 560 crore for a central public sector unit account which is showing signs of stress. This has not become an NPA account yet, Raju said, while declining to name the company as many other lenders are involved.

Provision Coverage Ratio (PCR), including written off accounts, stood at 89.22%, improving by 118 basis points (bps) from the year-ago period and from 89.1% in the March 2024 quarter.

In the June quarter, fresh slippages of the bank stood at Rs 3,015 crore versus Rs 3,188 crore a year ago.

Loan book

Advances grew 9.86 % over the previous year to Rs 9.75 lakh crore for the first quarter of  FY25. The retail lending portfolio increased 23.54%  year-on-year to Rs 1.75 lakh crore as of June-end 2024.

Domestic gross advances grew 9.17 % year-on-year to Rs 9.21 lakh crore. RAM (retail, agriculture, MSME) credit has grown 12.26% over the previous year  to Rs 5.52 lakh crore. Within that segment,  retail advances increase to Rs 1.76 lakh crore in the reporting quarter, registering a growth of 23.54% from the year-ago period. Agriculture and allied advances grew 8.14% over the previous year to Rs 2.53 lakh crore. Advances to corporates and others grew 6.87% over the previous year to Rs 4.24 lakh crore.

In the reporting quarter, Canara Bank has reduced their credit to non-banking finance companies (NBFCs) to Rs 1.19 lakh crore, down 18.15% on a yearly basis and 10.19% on a quarterly basis.

Also, the lender reduced credit to petroleum, coal products & nuclear fuels industry by 11.82% on-year and 3.62% on-quarter.

Deposits

The bank’s total deposits rose 11.97% over the previous year to Rs 13.35 lakh crore at the end of June 2024. Of the total domestic deposit base, low-cost CASA (current account savings account) deposits grew by 4.66% over the previous year to  Rs 3.81 lakh crore. The savings accounts were up 3.62% to Rs 3.32 lakh crore. The share of CASA in the total deposit mix fell to 30.98% from 33% a year ago.

Domestic deposits rose 11.5% year-on-year to Rs 12.31 lakh crore.

Term deposits grew 14.82% year-on-year to Rs 8.50 lakh crore as of 30 June 2024. Of this, retail term deposit stood at Rs 5.15 lakh crore .

Capital raise

The bank has no plans to raise equity capital, Raju said. The board has already approved plan to raise up to Rs 8,500 crore through At1 and tier II bonds in the current financial year. The bank also expects to get additional capital through stake sale in its life insurance and mutual fund subsidiaries through the IPO route.