Canara Bank is in a position to exceed its credit guidance of 12%, reprice its loans, expand net interest margins (NIMs) and add 250 branches in FY24, said the state-owned lender's managing director and CEO K Satyanarayana Raju.

The bank has guided for a 12% growth in its loan book in FY24 on the back of a huge sanctioned pipeline.

“We are guiding for advances to grow about 12% in FY24. But we could grow higher than our guidance as we have a strong loan pipeline. About Rs 22,000 crore of loans is sanctioned but not disbursed yet,” Raju said, adding that the bank has always delivered higher than its projections.

The lender expects to further expand its NIM in the current financial year due to space provided for repricing of loans.

“About 49% of our loans on the corporate side are linked to the MCLR (marginal cost of funds-based lending rate) and 40% of this are yet to repriced. So, we have a room for repricing during this financial year which will further improve our NIM,” said Raju.

Canara Bank has almost doubled its net profit to Rs 3,175 crore in the quarter ended March 2023 from Rs 1,666.22 crore on the back of robust loan growth, better pricing ability and improved asset quality.

Cash recovery from written off accounts also helped the bank to boost its profitability during the quarter. 

In the fiscal fourth quarter ended March 2023, the demand for working capital loans from oil companies helped the bank to report a 16.41% year-on-year growth in its loan book led by a 21% rise in corporate advances.

The bank’s gross global advances grew to Rs 8,62,782 crore, while domestic advances were up 15% to Rs 8,17,762 crore. 

The RAM sector advances jumped 13.23% to Rs 4,77,005 crore while retail loans grew 10.91% to Rs 1,40,051 crore. 

Will rising interest rates impact retail loans? “We have seen that higher interest rates on home and other retail loans have not impacted demand. We, in fact, are seeing strong demand from the mid-and-smaller segment loans. There has been less traction on the premium segment,” Raju said.  

The bank’s housing loan book climbed 14% to Rs 84,364 crore on a year-on-year basis. The gold loan portfolio grew 34% year-on-year.

Loans from the corporate segment grew 20.6% to Rs 3,85,777 crore. “There is a strong demand for loans from various sectors like infrastructure, chemicals, construction and steel,” Raju said.

Net interest income (NII), the difference between interest earned and interest expended, grew 23.01% to Rs 8,616 crore for the March quarter. In the year-ago period, NII was Rs 7,006 crore.

The bank reported a net interest margin of 3.07% in Q4FY2023.

The other interest income also grew 37.27% to Rs 3,536 crore and the non-interest income rose by 13.72% to Rs 18,762 crore. The total income of the bank grew 20.11% to Rs 1,03,187 crore.

The global business increased by 12% to Rs 20.41 lakh crore in March 2023.

The bank’s global deposits grew 8.54% to Rs 11.79 lakh crore. Domestic deposits grew by 6.5% on a yearly basis to Rs 10.95 lakh crore at the end of the quarter. 

The asset quality of the bank improved, with gross non-performing assets (NPAs) ratio declining to 5.35% in the March quarter, from 5.89% a year ago. 

The bank wrote off Rs 4,317 crore of bad loans in the quarter ended March 2023. It had a cash recovery of Rs 2,445 crore from its written off accounts. The total cash recovery of the bank during the quarter was Rs 4,349 crore.

Net NPA ratio also declined to 1.73% as of March 2023 from 2.65% a year ago.

The provision coverage ratio was 87.31%

“The NPA management was through recovery in written off accounts and one time settlement schemes, among other measures. We have also upgraded Rs 735 crore worth of loans during the quarter. So, there is a strict vigil on the NPAs,” Raju said.

The bank is planning to roll out 250 branches in FY24 to beef up its liability franchise, Raju said, adding that branch rationalisation will also continue simultaneously. The lender's total branch network stood at 9,706.

Canara Bank’s board has recommended a dividend of Rs 12 per equity share for the year ended March 2023, subject to requisite approvals.

The lender’s capital adequacy stood at 16.68% as of 31 March 2023. Raju said it will not be needing an equity capital raise for the next two years.