Canara Bank has posted a 43% rise in net profit in the September quarter over the year-ago period, bad loans have fallen and advances to agriculture have seen a significant surge.

The state-run bank’s net profit stood at Rs 3,606 crore in the fiscal second quarter ended September as net interest income rose 19.76% year-on-year to Rs 8,903 crore.

The net interest margin (NIM) declined to 3.02% from 3.05% in the preceding quarter. The bank expects the lending margin to improve under favourable conditions.

“The margin may increase if the liquidity conditions in the market improve. If the status quo is maintained, the lending margin will be rangebound between 2.9-3.05%,” said Canara Bank managing director and CEO K Satyanarayana Raju.

The Bengaluru-headquartered bank’s other income fell 3.9% year-on-year to Rs 4,634 crore. 

Deposits

The cost of deposits increased by 23 basis points quarter-on-quarter to 5.35%, while cost of funds rose by 10 basis points sequentially to 4.86%.

Domestic deposits grew by 8.22% year-on-year to Rs 11.43 lakh crore.

The CASA (current account savings account) ratio for the quarter was down 85 basis points sequentially at 32.15%. 

The bank does not see any rate hikes for CASA deposits in the near term to attract growth, Raju said.

Loans

Domestic gross advances grew 12.59% year-on-year to Rs 8.78 lakh crore for the quarter ended 30 September 2023.

The corporate segment was led by loans to Infrastructure, sectors associated with production-linked incentive schemes, power and renewable energy.

"We are cautious in our approach to corporate lending, with a greater focus on the rural, agriculture and allied, and MSME segments," Raju said.

The lender's RAM credit grew by 13.63% to Rs 5.16 lakh crore and accounted for 56% of total advances. Retail credit grew by 10.56% to Rs 1.48 lakh crore. This included housing loan growth at 12.32% to Rs 88,564 crore. Education loans grew by 14.68% and vehicle loans by 9.29%.

Agricultural loans grew 20.54% to Rs 2.36 lakh crore.

The bank expects to grow its loan book by 10.5% in the current financial year.

Asset Quality

The bank’s asset quality improved, with gross non-performing asset (NPA) falling to 4.76% in the September quarter from 6.37% a year ago and 5.15% a quarter ago. 

Net NPA declined to 1.41% from 2.19% a year ago and 1.57% a quarter ago.

Provisions

The bank's total provisioning came down to Rs 2,608 crore during the September quarter, from Rs 3,637 crore in the year-ago period.

Provisions fell by 19.8% on a year-on-year basis to Rs 2,201 crore for the September quarter.

The provision coverage ratio (PCR) improved to 88.73% in the September quarter from 85.36% in the year-ago period.

Fresh slippages fell 18% year-on-year to Rs 2,894 crore. Cash recoveries and upgrades were lower by 45% year-on-year to Rs 1,869 crore.

Slippages of approximately Rs 800 crore came from the agriculture portion, Rs 900 crore from MSMEs, Rs 400 crore from retail and the balance of Rs ~750 crore from corporates.

Recoveries in written-off accounts were higher year-on-year by 49% at Rs 1,791 crore.