Canara Bank reported an 18.4% rise in net profit at Rs 3,757.23 crore for the quarter ended March 2024 on back of improved asset quality, growth in retail loans and other income.

Advances

The country’ fourth-largest public sector bank by assets expects the loan book to grow at 11-12% in the current fiscal despite taking the decision to shed low-yielding corporate loans, managing director and CEO K Satyanarayana Raju said.

In the fiscal fourth-quarter ended March 2024, the lender’s total loan book grew 11.34% year- on-year to Rs 9.60 lakh crore, led by a 12% growth in retail loans and a 19% expansion in the financing of agricultural and allied activities.

Domestic advances grew 11.06% YoY to Rs 9.08 lakh crore as on 31 March 2024, higher than the bank’s earlier guidance of 10%.

Deposits

The bank’s total deposits grew 11.29% to Rs 1.31 lakh crore.  Of this, domestic deposits accounted for Rs 1.22 lakh crore as on 31 March 2024, growing 10.98% year-on-year.

Asset quality

The bank's asset quality improved, with the gross non-performing assets (NPA) ratio reducing to 4.32% in the March quarter, lower than the 4.39% that the bank reported in the preceding quarter and 5.35% a year ago.

Net NPA ratio was lower at 1.27% as on 31 March 2024, compared to 1.32% a quarter ago and 1.73% a year ago.

Raju guided gross NPA to come down to 3.25% while net NPA should be at 1% by the end of FY25.

Fresh slippages in the March 2024 quarter increased to Rs 3,082 crore, as compared to Rs 2,857 crore in the year-ago period.

Total cash recovery was at Rs 3,161 crore. This included Rs 2,232 crore of recovery in written off accounts. Upgrades for the quarter stood at Rs 560 crore.

“On the asset quality side, the bank has maintained that its recoveries and upgrades should outpace its fresh slippages. We have maintained this by stepping up our recovery efforts,” Raju said.

Provision Coverage Ratio (PCR) came in at 89.10% as against 89.01% a quarter ago and 87.31% a year ago.

NII and NIM

The bank’s net interest income (NII) in the March quarter grew 11.18% to Rs 9,580 crore from Rs 8,617 crore a year ago. 

Net interest margin (NIM) improved to 3.05% as on 31 March 2024, from 2.95% a year ago, with the bank countering rise in cost of funds with higher lending rates.

Given the prevailing high interest rate regime, Raju said the net interest margin would be in the range of 2.95-3 per cent during the current fiscal.

“We will maintain our margins at around 3%, with improvement in our yields while capping cost of deposits at 8%,” Raju said.

Other income

A 9% growth in other income also contributed to the bank's profit, rising to Rs 5,218 crore from Rs 4,775 crore a year ago.

Dividend

The bank's board recommended a dividend of Rs 16.10 per equity share (161%) of face value of Rs 10 each to the shareholders for 2023-24, subject to approval.

Divestment

The bank’s plans to divest part of its stake in two of its subsidiaries - Canara HSBC Life Insurance and Canara Robeco Mutual Fund - through an initial public offering are on track, Raju said. 

These are different stages of approval and one of these could happen by the end of the current fiscal, he added.