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What the record says.
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.
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Guidance to track
- Management expects NIM to improve from 2.90% in Q1 to around 2.95% by year-end, driven by seasonal improvement in subsequent quarters.
- 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.
- Management guided for gross NPA to decline to 3.5% by year-end, from 4.14% in Q1, supported by controlled slippages and recoveries.
- 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.
Risks flagged
- Incremental deposit costs are above 7.5%, pressuring NIMs. Management expects this to persist for 1-2 quarters unless liquidity improves.
- A central PSU account of INR 3,800 crore slipped to SMA-0, though fully provided for. Further downgrade could impact asset quality.
- 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.
- CFO noted that Ind AS could require higher provisions on standard assets, potentially offsetting any relief on NPA provisions.
Key quotes
- First time in the history of the Canara Bank, our common equity- Tier one, that is CET1, has crossed 12% and stood at 12.05% with a 55 basis points year-on-year improvement.
- Our main thrust area is consistency. There should not be any majors in your performance, whether it is a bottom line or the top line.
- We are very much price conscious, so we look forward for that. Whenever we get a better opportunity, better pricing, then we will go to the market and raise that.
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