Canara Bank Q3 Results: Profit Rises 27% On Higher Income

Canara Bank's third-quarter profit rose, beating analysts' estimates.

The public sector bank's standalone net profit jumped 26.8% year-on-year to Rs 3,656.1 crore in the quarter ended December 2023, according to an exchange filing on Wednesday. Analysts polled by Bloomberg estimated a net profit of Rs 3,451.5 crore.

• Net interest income up 10% at Rs 9,417 crore (YoY).

• Net profit up 26.8% at Rs 3,656.1 crore (YoY) (Bloomberg estimate: Rs 3,451.5 crore).

• Gross NPA at 4.39% vs 4.76% (QoQ).

• Net NPA at 1.32% vs 1.41% (QoQ)

Net interest income, or core income, of the bank rose 10% from last year to Rs 9,417 crore in the quarter. Other income rose 7.7% year-on-year to Rs 4,295.10 crore.

Other income was down quarter-on-quarter due to a dip in treasury income, K Satyanarayana Raju, managing director and chief executive officer of Canara Bank, told reporters in a press conference.

"We are struggling in treasury income due to high bond rates," he said.

Asset quality for the lender improved, with the gross non-performing asset ratio falling 37 basis points quarter-on-quarter to 4.39%. The net NPA ratio, too, improved 9 basis points to 1.32%, as compared with 1.41% in the previous quarter.

The NPAs from personal loans stood at about 1.2% and the bank's exposure stays limited, according to Raju.

"The share of clean personal loans is about Rs 9,000 crore," he said.

The bank's operating expenses rose 22.5% year-on-year to Rs 6,906 crore.

Operating expenditure rose on provisions against the bipartite pact between IBA and employees on wage revision, the CEO said. A shortfall has been provided for it in Q3 and even the cost-to-income ratio stood at 50.37% due to provisions, he said.

The net interest margin stayed flat at 3.02% quarter-on-quarter. Despite a pressure on deposits, the bank has been able to maintain NIM above 3%, Raju said.

"We have been able to maintain a healthy portfolio on account of advances and healthy NPA," he said.

In the quarter ended December, the bank's slippages stood at Rs 2,697 crore, according to Raju. Of this, Rs 1,000 crore were in agriculture.

The lender now expects Q4 slippages at Rs 2,800 crore, according to the CEO. "Rs 3,500 crore worth accounts expected under recoveries and upgradation in Q4."

Provisions for NPA for the quarter rose 9.7% from a year ago to Rs 2,106.9 crore. The provision coverage ratio stood at 89.01% for the quarter ended December.

Credit costs for the bank stood at 0.97%, falling 5 basis points quarter-on-quarter from the previous 1.02%.

The bank's capital adequacy ratio stood at 15.78%, as of December 2023. Of this, the CET-1 ratio was 11.28%.

The lender took a 52 bps hit on capital, due to Reserve Bank of India's move of increasing credit risk weights, according to Raju.

"A reduction is reflecting at 42 bps due to internal accruals in the current quarter; we have improved 10 bps," he said.

The lender's domestic gross advances increased 12.56% year-on-year to Rs 9,01,465 crore in the quarter ended December. Of this, retail advances stood at Rs 1,53,640 crore, up 12.14% year-on-year.

However, agriculture and allied sectors saw the maximum growth of 19% year-on-year to Rs 2,42,470 crore.

The CASA ratio for the lender stood at 31.65% for the quarter. It continues to be a concern due to high interest rate regime, according to Raju.

"Our business is growing at 10% but CASA only at 5.5%; we hope to touch the 8% deposit growth soon," he told reporters over a press call.

The domestic deposits grew 8.07% year-on-year to Rs 11,66,848 crore. The lender was cautious in raising term deposit rates and only does it when it gets competitive pricing, Raju said.

"Our retail deposits are growing fast and we will focus more on RAM, and closely monitor yields, cost of funds and interest burden," he said.