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Rising deposit costs due to systemic liquidity tightness
View Risks →Canara Bank — Q1 FY25
Canara Bank reported a steady Q1 FY25 with net profit of INR 3,905 crore (+10.47% YoY), driven by strong retail growth (23.54% YoY) and improved asset quality.
bullish
high
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Canara Bank reported a steady Q1 FY25 with net profit of INR 3,905 crore (+10.47% YoY), driven by strong retail growth (23.54% YoY) and improved asset quality. Global business grew 11.07% YoY to INR 2,310,000 crore, with RAM sector reaching 57% of credit. CET1 ratio crossed 12% for the first time, and PCR improved to 89.22%. NIM stood at 2.90%, with management guiding for ~2.95% by year-end. Slippages remained controlled at ~INR 3,000 crore, though a large PSU account (INR 3,800 crore) slipped to SMA-0, fully provided for. Guidance for FY25 maintained: credit growth ~10%, ROA >1%, credit cost ~1.1%. Key risk: rising deposit costs due to systemic liquidity tightness may pressure NIMs.
केनरा बैंक ने पहली तिमाही (अप्रैल-जून 2024) में 3,905 करोड़ रुपये का शुद्ध लाभ कमाया, जो पिछले साल से 10.47% ज़्यादा है। यह मुनाफा रिटेल (आम ग्राहकों) को दिए कर्ज में 23.54% बढ़ोतरी और कर्ज वसूली बेहतर होने से आया। बैंक का कुल कारोबार 11.07% बढ़कर 23.10 लाख करोड़ रुपये हो गया। पहली बार बैंक की मजबूत पूंजी (CET1) 12% से ऊपर पहुंची, और फंसे कर्ज के लिए प्रावधान कवरेज अनुपात (PCR) 89.22% हो गया। ब्याज आय पर मार्जिन (NIM) 2.90% रहा, जो साल के अंत तक 2.95% होने का अनुमान है। नए फंसे कर्ज (स्लिपेज) 3,000 करोड़ रुपये पर काबू में रहे। बैंक ने इस साल 10% कर्ज वृद्धि, 1% से ज़्यादा लाभप्रदता (ROA) और 1.1% कर्ज लागत का लक्ष्य रखा है। मुख्य चुनौती: बाजार में पैसे की कमी से जमा पर ब्याज बढ़ने से मार्जिन पर दबाव पड़ सकता है।
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Read Transcript →Quarter Snapshot
Global Business
INR 2,310,000 crore
+11.07% YoY
Global business grew 11.07% year-on-year, driven by deposit growth of 11.97% and advances growth of 9.86%.
CET1 Ratio
12.05%
+55 bps YoY
Common Equity Tier 1 ratio crossed 12% for the first time, improving 55 bps year-on-year.
Gross NPA
4.14%
-101 bps YoY
Gross NPA ratio declined 101 bps year-on-year to 4.14%, reflecting improved asset quality.
Retail Credit Growth
23.54%
+23.54% YoY
Retail credit grew 23.54% year-on-year, led by gold loans and housing loans, outpacing overall advances growth.
What Changed vs Last Quarter
NEW
NIM guidance of 2.95% for FY25
Management expects NIM to improve from 2.90% in Q1 to around 2.95% by year-end, driven by seasonal improvement in subsequent quarters.
NEW
Gross NPA target of 3.5% by FY25 end
Management guided for gross NPA to decline to 3.5% by year-end, from 4.14% in Q1, supported by controlled slippages and recoveries.
NEW
Capital raising plan of INR 8,000 crore via AT1 and Tier 2 bonds
Board has approved raising INR 4,000 crore in AT1 bonds and INR 4,500 crore in Tier 2 bonds, subject to favorable market conditions.
UPDATED
Credit growth guidance of ~10% for FY25
Advances growth target of 10% for the full year, with Q1 already at 9.86% despite shedding INR 22,500 crore of low-yielding corporate loans.
DROPPED
NIM to be maintained at 2.95%-3% for FY25
Despite tight liquidity, management expects NIM to remain in the 2.95%-3% range, with potential upside if liquidity eases.
DROPPED
CASA ratio target of 33% by FY25
Management aims to achieve 33% CASA ratio by end of FY25 through new products and digital initiatives.
DROPPED
Cost-to-income ratio to be maintained around 47%
Management expects to keep cost-to-income ratio at or below 47% despite wage revision and IT investments.
NEW RISK
Rising deposit costs due to systemic liquidity tightness
Incremental deposit costs are above 7.5%, pressuring NIMs. Management expects this to persist for 1-2 quarters unless liquidity improves.
NEW RISK
Large PSU account slipping to SMA-0
A central PSU account of INR 3,800 crore slipped to SMA-0, though fully provided for. Further downgrade could impact asset quality.
NEW RISK
CASA ratio decline due to government fund outflows
CASA ratio fell to 32.7% from 35.4% in March, partly due to central government funds moving to RBI. Management explained but did not quantify recovery timeline.
NEW RISK
Ind AS transition may increase standard asset provisions
CFO noted that Ind AS could require higher provisions on standard assets, potentially offsetting any relief on NPA provisions.
RISK GONE
RBI draft circular on project loans
New RBI guidelines on project implementation could increase provisioning requirements, though management is confident of managing the impact.
RISK GONE
Elevated operating expenses from wage revision
Staff costs rose sharply due to bipartite settlement arrears and actuarial provisions; normalization expected from Q1 FY25.
RISK GONE
Low-yielding corporate loan book drag
The bank is gradually reducing INR 60,000-70,000 crore of low-yielding corporate loans, which may temper headline credit growth.
RISK GONE
Potential impact of RBI investment reclassification
New accounting norms for investment portfolio could affect treasury profits, though initial impact added INR 1,400 crore to reserves.
🤫 Topics management stopped discussing
Mentioned in Q3 FY24, Q4 FY24
Management expects to keep cost-to-income ratio at or below 47% despite wage revision and IT investments.
Mentioned in Q3 FY24, Q4 FY24
Despite tight liquidity, management expects NIM to remain in the 2.95%-3% range, with potential upside if liquidity eases.
Mentioned in Q1 FY24, Q3 FY24
Fresh slippages of INR 2,697 crore were largely from MSME (INR 1,200 crore) and agriculture (INR 1,000 crore), which could persist.
Mentioned in Q1 FY24, Q3 FY24
Management acknowledged that cost of deposits is rising and NIM may face pressure, though they aim to keep it near 3%.
Fast read
Guidance and risk preview
Management expects NIM to improve from 2.90% in Q1 to around 2.95% by year-end, driven by seasonal improvement in subsequent quarters.
Incremental deposit costs are above 7.5%, pressuring NIMs.
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