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Rising deposit costs pressuring NIM
View Risks →Canara Bank — Q3 FY24
Canara Bank reported a strong Q3 FY24 with net profit of INR 3,656 crore, driven by robust RAM sector growth (14.56% YoY) and controlled credit costs (0.97%, first time below 1%).
bullish
high
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Canara Bank reported a strong Q3 FY24 with net profit of INR 3,656 crore, driven by robust RAM sector growth (14.56% YoY) and controlled credit costs (0.97%, first time below 1%). The bank absorbed a one-time wage revision impact of INR 700 crore, yet maintained ROA above 1% at 1.01%. Gross NPA improved to 4.39% (down 150bps YoY) and PCR reached 89.01%. Management guided for full-year credit growth of ~12%, NIM near 3%, and cost-to-income below 45% by March. Key risks include rising deposit costs pressuring NIM and potential slippages from MSME/agriculture segments.
केनरा बैंक ने तीसरी तिमाही में 3,656 करोड़ रुपये का शुद्ध लाभ कमाया। यह मुनाफा छोटे और मध्यम कर्जों में 14.56% की बढ़ोतरी और कर्ज देने में कम घाटा (0.97%) होने से आया। बैंक ने 700 करोड़ रुपये का एकमुश्त वेतन खर्च भी झेला, फिर भी उसकी कमाई दर (ROA) 1.01% रही। फंसे कर्ज (NPA) घटकर 4.39% हो गए और कुल प्रावधान कवरेज 89.01% पहुंच गया। बैंक का अनुमान है कि पूरे साल कर्ज 12% बढ़ेगा, ब्याज दर (NIM) 3% के आसपास रहेगी और खर्च कम होंगे। लेकिन जमा पर ब्याज बढ़ने से मुनाफा कम हो सकता है और छोटे किसानों/व्यापारियों के कर्ज डूबने का खतरा है।
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Read Transcript →Quarter Snapshot
Gross NPA
4.39%
-150bps YoY
Gross NPA improved to 4.39% from 5.89% a year ago, beating the 4.50% full-year guidance.
Credit Cost
0.97%
-24bps YoY
Credit cost fell below 1% for the first time in bank history, reflecting improved asset quality.
RAM Sector Growth
14.56%
+14.56% YoY
RAM (Retail, Agriculture, MSME) advances grew 14.56% YoY, now 56% of total advances.
Earnings Per Share (EPS)
INR 79.21
+45.74% YoY
9-month EPS of INR 79.21 surpassed the full-year guidance of INR 65.
What Changed vs Last Quarter
NEW
Full-year credit growth of ~12%
Management expects domestic advances to grow around 11.5-12% for FY24, driven by RAM and selective corporate lending.
NEW
Cost-to-income ratio below 45% by March 2024
Despite one-time wage provisions, management is confident of achieving cost-to-income below 45% by Q4 FY24.
NEW
NIM to be maintained near 3%
Net interest margin is expected to remain close to 3% despite pressure from rising deposit costs.
NEW
Capital raising of INR 6,100 crore in next two months
Bank plans to raise remaining AT1 and Tier 2 bonds of INR 6,100 crore when market conditions are favorable.
DROPPED
NIM expected in 2.9%-3.05% range
Management guided NIM between 2.9% and 3.05% for coming quarters, depending on liquidity conditions.
DROPPED
Loan growth target of 12% for FY24
Management expects advances to grow around 12% for the full year, driven by RAM segment.
DROPPED
PCR target of 90% by end of FY24
Management aims to increase provision coverage ratio to 90% by March 2024.
DROPPED
Credit cost guidance of ~1%
Management expects credit cost to remain around 1% until PCR reaches 95%.
NEW RISK
Rising deposit costs pressuring NIM
Management acknowledged that cost of deposits is rising and NIM may face pressure, though they aim to keep it near 3%.
NEW RISK
CASA ratio remains low at 31.65%
CASA growth (5.05% YoY) lags deposit growth (8.55%), impacting funding costs. Management has launched campaigns but no near-term target given.
NEW RISK
Potential slippages from MSME and agriculture
Fresh slippages of INR 2,697 crore were largely from MSME (INR 1,200 crore) and agriculture (INR 1,000 crore), which could persist.
NEW RISK
Regulatory risk weight increase impact on capital
RBI's higher risk weights on NBFC and personal loans reduced capital by 52 bps; CET1 ratio fell to 15.78% from 16.20%.
RISK GONE
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.
RISK GONE
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.
RISK GONE
Slow NCLT recovery process
Recovery from NCLT-referred accounts remains slow, with most resolutions via liquidation, limiting recoveries.
RISK GONE
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.
🤫 Topics management stopped discussing
Mentioned in Q1 FY24, Q2 FY24
Management aims to increase provision coverage ratio to 90% by March 2024.
Mentioned in Q1 FY24, Q2 FY24
Management expects advances to grow around 12% for the full year, driven by RAM segment.
Fast read
Guidance and risk preview
Management expects domestic advances to grow around 11.5-12% for FY24, driven by RAM and selective corporate lending.
Management acknowledged that cost of deposits is rising and NIM may face pressure, though they aim to keep it near 3%.
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