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Margin compression from high deposit rates
View Risks →Canara Bank — Q2 FY24
Canara Bank reported a strong Q2 FY24 with net profit surging 42.81% YoY to INR 3,606 crore, driven by 19.76% YoY NII growth and improved asset quality.
bullish
high
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Canara Bank reported a strong Q2 FY24 with net profit surging 42.81% YoY to INR 3,606 crore, driven by 19.76% YoY NII growth and improved asset quality. Gross NPA fell 161 bps YoY to 4.76%, while PCR improved to 88.73%. The bank maintained NIM at 3.02% despite deposit cost pressure, with management guiding NIM in the 2.9%-3.05% range. RAM credit grew 13.63%, and the bank expects 12% loan growth for FY24. Key risks include margin compression from high deposit rates and potential slippage from a large LRD account (INR 650 crore provisioned). Overall, the bank is on track to meet its guidance of sub-45% cost-to-income and 1% credit cost.
केनरा बैंक ने दूसरी तिमाही में 42.81% ज्यादा मुनाफा कमाया, जो 3,606 करोड़ रुपये रहा। इसकी वजह ब्याज कमाई में 19.76% का उछाल और कर्ज वसूली में सुधार है। बैंक का फंसा कर्ज (NPA) घटकर 4.76% रह गया, जो पिछले साल से 1.61% कम है। बैंक ने मुनाफे का दायरा 2.9% से 3.05% के बीच रखने का अनुमान जताया है। छोटे और मझोले कर्ज (RAM) में 13.63% बढ़ोतरी हुई। बैंक को इस साल 12% कर्ज बढ़ने की उम्मीद है। लेकिन जमा पर ज्यादा ब्याज दरों से मुनाफा कम होने का खतरा है। साथ ही, एक बड़े कर्ज खाते (650 करोड़ रुपये) से नुकसान हो सकता है। कुल मिलाकर, बैंक अपने लक्ष्यों को पूरा करने की राह पर है।
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Read Transcript →Quarter Snapshot
Gross NPA Ratio
4.76%
-161 bps YoY
Gross NPA improved to below 5% for the first time, reflecting better asset quality.
PCR (Provision Coverage Ratio)
88.73%
+337 bps YoY
PCR improved significantly, with management targeting 90% by year-end.
Return on Assets (ROA)
1.01%
+30 bps YoY
ROA crossed 1% for the first time in a decade, indicating improved profitability.
CET1 Ratio
11.58%
+44 bps YoY
Common Equity Tier 1 ratio reached an all-time high through internal accruals.
What Changed vs Last Quarter
NEW
NIM expected in 2.9%-3.05% range
Management guided NIM between 2.9% and 3.05% for coming quarters, depending on liquidity conditions.
NEW
Loan growth target of 12% for FY24
Management expects advances to grow around 12% for the full year, driven by RAM segment.
NEW
Credit cost guidance of ~1%
Management expects credit cost to remain around 1% until PCR reaches 95%.
UPDATED
PCR target of 90% by end of FY24
Management aims to increase provision coverage ratio to 90% by March 2024.
DROPPED
NIM guidance above 3% for FY24
Management guided for net interest margin to remain above 3%, with Q1 NIM at 3.05%.
DROPPED
Credit growth of 12-14% for FY24
Management expects loan growth in the range of 12-14% for the full year, with Q1 domestic credit growing over 3%.
DROPPED
PCR to cross 90%
Management aims to increase provision coverage ratio to above 90% through additional provisions each quarter.
NEW RISK
Margin compression from high deposit rates
Elevated term deposit rates (7.25% special scheme) may pressure NIM, potentially falling to 2.9% if liquidity remains tight.
NEW RISK
Potential slippage from large LRD account
A single large LRD account (mall) under SMA-2 has been provisioned INR 650 crore; if it slips to NPA, recovery may be slow despite collateral.
NEW RISK
Slow NCLT recovery process
Recovery from NCLT-referred accounts remains slow, with most resolutions via liquidation, limiting recoveries.
NEW RISK
Wage hike arrears impact
Bipartite settlement arrears from Nov 2022 could create a one-time expense shock; bank has provisioned INR 1,150 crore so far.
RISK GONE
Pressure on NIM from rising deposit costs
Management acknowledged stress on margins due to higher interest expenses on deposits, which could persist if liquidity remains tight.
RISK GONE
PSLC income decline in subsequent quarters
Analyst raised concern that PSLC income, which contributed significantly in Q1, will taper off in later quarters, impacting profitability.
RISK GONE
Slippages from MSME and agri segments
Slippages in Q1 were concentrated in MSME (₹1,380 crore) and agriculture (₹800 crore), with SMA book elevated due to seasonal factors.
Fast read
Guidance and risk preview
Management guided NIM between 2.9% and 3.05% for coming quarters, depending on liquidity conditions.
Elevated term deposit rates (7.25% special scheme) may pressure NIM, potentially falling to 2.9% if liquidity remains tight.
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