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Liquidity tightness impacting deposit growth and NIM
View Risks →Canara Bank — Q3 FY25
Canara Bank delivered a 12.25% YoY PAT growth to ₹4,104 crore in Q3 FY25, driven by strong operating profit growth of 15.15% YoY to ₹7,837 crore and a 23.31% YoY rise in fee income.
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Canara Bank delivered a 12.25% YoY PAT growth to ₹4,104 crore in Q3 FY25, driven by strong operating profit growth of 15.15% YoY to ₹7,837 crore and a 23.31% YoY rise in fee income. Asset quality improved significantly with gross NPA falling to 3.34% (down 105 bps YoY) and net NPA hitting an all-time low of 0.89%. The bank surpassed 9 of 13 full-year guidance parameters nine months early, including advances growth of 10.45% and credit cost of 0.89%. However, deposit growth lagged at 8.44% due to liquidity constraints, and NIM faced pressure from higher-cost term deposits. Management expects to maintain CD ratio below 78% and LCR above 115% via longer-tenure deposits. Key risk: sustained liquidity tightness could further compress margins if deposit competition intensifies.
केनरा बैंक ने तीसरी तिमाही में मुनाफा 12.25% बढ़ाकर 4,104 करोड़ रुपये कर दिया। इसकी वजह परिचालन मुनाफे में 15.15% और फीस आय में 23.31% की बढ़ोतरी रही। बैंक के खराब कर्ज (NPA) में कमी आई - कुल खराब कर्ज 3.34% और शुद्ध खराब कर्ज 0.89% पर आ गया, जो अब तक का सबसे कम है। बैंक ने साल के 13 में से 9 लक्ष्य 9 महीने पहले ही पूरे कर लिए। हालांकि, जमा वृद्धि सिर्फ 8.44% रही क्योंकि बाजार में नकदी कम थी। ऊंची ब्याज वाली जमाओं के कारण ब्याज आय पर दबाव है। बैंक जमा बढ़ाने पर ध्यान देगा ताकि कर्ज-जमा अनुपात 78% से नीचे रहे। सावधानी: अगर जमा के लिए होड़ बढ़ी तो मुनाफा और कम हो सकता है।
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Gross NPA
3.34%
-105 bps YoY
Gross NPA ratio improved to 3.34% from 4.39% a year ago, reflecting better asset quality.
Net NPA
0.89%
-43 bps YoY
Net NPA reached an all-time low of 0.89%, down from 1.32% YoY.
PCR
91.26%
+225 bps YoY
Provision coverage ratio hit an all-time high of 91.26%, up from 89.01% YoY.
Slippage Ratio
0.96%
-28 bps YoY
Slippage ratio fell below 1% for the first time, indicating lower fresh NPA formation.
What Changed vs Last Quarter
NEW
CD ratio to be maintained below 78%
The bank aims to keep its global credit-deposit ratio below 78% to manage liquidity and cost of funds.
NEW
LCR to be restored to 115-120%
After the proposed RBI LCR guidelines, the bank plans to restore LCR to 115-120% by raising longer-tenure deposits at 7.3-7.4%.
NEW
Cost-to-income ratio around 47-48%
Management expects to maintain cost-to-income ratio in the 47-48% range, with annual expense growth of 6-7%.
UPDATED
Advances growth target of 10% for FY25
Management expects to achieve 10% advances growth for the full year, with current growth at 10.45% already exceeding the target.
DROPPED
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.
DROPPED
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%.
DROPPED
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.
NEW RISK
Liquidity tightness impacting deposit growth and NIM
Market liquidity constraints have made deposit mobilization costly, pressuring NIM. Management acknowledged the challenge and is using excess SLR and higher-rate deposits to manage.
NEW RISK
LCR guideline impact could compress margins further
Proposed RBI LCR guidelines effective April 2025 could reduce LCR by 11-12 bps, requiring costly longer-tenure deposits that may further compress NIM.
NEW RISK
CASA ratio decline and competitive pressure
CASA ratio has fallen to 30% due to customers shifting surplus to term deposits or mutual funds. Management's initiatives may take time to reverse the trend.
NEW RISK
Gold loan regulatory changes could impact growth
RBI's potential changes to gold loan norms (collateral-free for PSL) may affect the bank's large gold loan portfolio, though management sees no immediate issue.
RISK GONE
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.
RISK GONE
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.
RISK GONE
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.
RISK GONE
Co-lending book remains negligible
Co-lending book is only ₹320 crore; management is cautious on underwriting standards, limiting growth in this segment.
🤫 Topics management stopped discussing
Mentioned in Q1 FY24, Q1 FY25, Q2 FY24, Q2 FY25, Q4 FY24
Management expects full-year credit growth of around 11%, driven by 3.5-4% quarterly growth in H2, despite shedding low-yielding advances.
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 Q1 FY24, Q2 FY25, Q3 FY24
CASA ratio at 31% keeps cost of deposits higher than peers; NIM may struggle to cross 3% in near term.
Mentioned in Q2 FY24, Q2 FY25
Credit cost guidance of 1.10% is expected to be undershot; management sees it below 1% for the full year.
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.
Fast read
Guidance and risk preview
Management expects to achieve 10% advances growth for the full year, with current growth at 10.45% already exceeding the target.
Market liquidity constraints have made deposit mobilization costly, pressuring NIM.
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