Canara Bank has lowered its guidance on net interest margin (NIM) and low-cost CASA (current account savings account) deposits for the current fiscal but the other growth parameters are pretty much in place, the state-owned lender’s managing director and CEO K Satyanarayana Raju has said.

The Bengaluru-headquartered bank’s fiscal third quarter net profit rose 12.25% year-on-year to Rs 4,104.20 crore despite NIM narrowing, as it was aided by non-interest income which climbed 35.1% to Rs 5,802 crore.

NII

Net interest income (NII) fell 2.85% year-on-year to Rs 9,149 crore in Q3FY25 compared to Rs 9,417 crore a year ago. Its cost of deposits rose to 5.72% in Q3FY25 from 5.42% a year earlier. 

NIM

The lender expects NIM to settle at 2.8% to 2.83%, lower than the earlier estimate of 2.9%.

For the fiscal third quarter ended December 2024, the lender’s NIM stood at 2.71% while the cumulative figure was at 2.83%. This is lower than 3.07% quarterly and 3.05% cumulative in March 2024.

“The interest rate on deposits has increased steeply and especially in the bulk deposits, whether it is CD or bulk deposits, it is now almost touching 8%. Under such circumstances, when your cost of raw material is becoming costly, and your final product sale price is the same, then automatically the impact will be on the margins,” Raju explained.

Total biz

The bank’s total business grew 9.3% to Rs 24.19 lakh crore.

While deposits stood at Rs 13. 69 lakh crore, up 8.44% year-on-year, advances were at Rs 10.50 lakh crore, up 10.45%. 

CASA

The CASA growth for FY25 has been revised to 31%, down from the bank’s earlier estimate of 33%. 

CASA deposits were at Rs 3.77 lakh crore, down 2.61%  from the preceding quarter. Savings deposits fell 3.24% to Rs 3.3 lakh crore.

Canara Bank’s loan book is expected to grow at 11% for the January-March 2025 quarter, higher than its earlier projection of 10%. Deposit growth is expected to surpass its earlier guidance of 9%.  

Asset quality

The asset quality improved, with gross non-performing assets (NPA) declining by 105 basis points to 3.34% as of 31 December 2024. 

Net NPA reached an all-time low in Canara Bank’s history to settle at 0.89%, a year-on-year decline of 43 basis points.

The bank’s wholly owned subsidiary in Tanzania has closed down its business operations, after selling it to Tanzania Exim Bank.