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Steel exposure (RINL) SMA-2 account
View Risks →Canara Bank — Q2 FY25
Canara Bank reported a strong Q2 FY25 with net profit crossing ₹4,014 crore for the first time, up 11.31% YoY.
bullish
high
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2-Minute Summary
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Canara Bank reported a strong Q2 FY25 with net profit crossing ₹4,014 crore for the first time, up 11.31% YoY. Global business grew 9.42% to ₹23.59 lakh crore, driven by RAM sector growth of 11.54%. Asset quality improved sharply: gross NPA fell to 3.73% (down 103bps YoY) and net NPA to 0.99% (below 1% for the first time). PCR reached a record 90.89%. NIM remained resilient at 2.88% despite industry pressure, aided by shedding low-yielding advances and a new gold loan product. Management guided for ~11% credit growth in FY25, with RAM focus. Key risks include elevated SMA-2 from a steel exposure (RINL) and potential margin compression if deposit costs rise further.
केनरा बैंक ने दूसरी तिमाही में 4,014 करोड़ रुपये का शुद्ध लाभ कमाया, जो पिछले साल से 11.31% ज्यादा है। बैंक का कुल कारोबार 9.42% बढ़कर 23.59 लाख करोड़ रुपये हो गया, खासकर रिटेल, कृषि और एमएसएमई क्षेत्र में 11.54% की बढ़ोतरी से। बैंक के खराब कर्ज (एनपीए) में बड़ी गिरावट आई है - कुल एनपीए 3.73% और शुद्ध एनपीए 0.99% हो गया, जो पहली बार 1% से नीचे है। बैंक ने खराब कर्ज के लिए 90.89% का रिकॉर्ड प्रावधान किया है। ब्याज दरों में कमी के बावजूद बैंक का ब्याज मार्जिन 2.88% पर स्थिर रहा। प्रबंधन ने चालू वित्त वर्ष में 11% कर्ज वृद्धि का अनुमान लगाया है। मुख्य जोखिमों में स्टील कंपनी (आरआईएनएल) से जुड़ा कर्ज और ब्याज दरें बढ़ने पर मार्जिन पर दबाव शामिल है।
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Gross NPA
3.73%
-103bps YoY
Gross NPA ratio improved to 3.73% from 4.76% a year ago, driven by lower slippages and higher recoveries.
Net NPA
0.99%
-42bps YoY
Net NPA fell below 1% for the first time, reflecting strong asset quality improvement.
PCR (Provision Coverage Ratio)
90.89%
+216bps YoY
PCR crossed 90% for the first time, aided by additional ₹500 crore provisions on existing NPAs.
CASA Ratio
31.27%
+28bps QoQ
CASA ratio improved sequentially to 31.27%, with absolute CASA growth of ₹8,000 crore in Q2.
What Changed vs Last Quarter
NEW
Credit cost below 1% for FY25
Credit cost guidance of 1.10% is expected to be undershot; management sees it below 1% for the full year.
NEW
RAM sector growth of 11%+
RAM (Retail, Agriculture, MSME) credit is expected to grow faster than corporate, with retail growing 13-14% and MSME 9-10%.
NEW
Gold loan growth of 16-17%
Gold loan portfolio is expected to grow 16-17% this year, driven by a new digitized product for metro cities.
UPDATED
Credit growth of ~11% for FY25
Management expects full-year credit growth of around 11%, driven by 3.5-4% quarterly growth in H2, despite shedding low-yielding advances.
DROPPED
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.
DROPPED
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.
DROPPED
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.
NEW RISK
Steel exposure (RINL) SMA-2 account
A central government steel exposure (RINL) contributed to SMA-2 spike; resolution is ongoing but could slip into NPA if not resolved.
NEW RISK
Margin pressure from high deposit costs
CASA ratio at 31% keeps cost of deposits higher than peers; NIM may struggle to cross 3% in near term.
NEW RISK
State government account in SMA-2
Another large SMA-2 account (~₹3,000 crore) with state government guarantee; though currently moved to SMA-1, it remains a risk.
NEW RISK
Co-lending book remains negligible
Co-lending book is only ₹320 crore; management is cautious on underwriting standards, limiting growth in this segment.
RISK GONE
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.
RISK GONE
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.
RISK GONE
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.
RISK GONE
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.
🤫 Topics management stopped discussing
Mentioned in Q1 FY24, Q1 FY25, Q2 FY24
Management guided for gross NPA to decline to 3.5% by year-end, from 4.14% in Q1, supported by controlled slippages and recoveries.
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 Q1 FY24, Q1 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.
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.
Fast read
Guidance and risk preview
Management expects full-year credit growth of around 11%, driven by 3.5-4% quarterly growth in H2, despite shedding low-yielding advances.
A central government steel exposure (RINL) contributed to SMA-2 spike; resolution is ongoing but could slip into NPA if not resolved.
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