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What the record says.
Canara Bank reported a strong Q2 FY26 with net profit of INR 4,774 crore (+18.93% YoY) and operating profit of INR 8,588 crore (+12.2% YoY). Global business grew 13.55% YoY driven by RAM credit (+17%), with retail loans surging 29.11%. Asset quality improved sharply: GNPA fell to 2.35% (down 138bps YoY) and PCR reached 93.59%. NIM remained stable at 2.50% but is expected to improve from Q4. CASA ratio improved to 30.69% with 10% YoY growth in absolute balances. Management guided for net profit to cross INR 20,000 crore for FY26 and reiterated 32% CASA target by March. Key risks include NIM compression if further rate cuts occur and potential impact from ECL implementation by March 2027, though management believes credit cost will remain below 1%.
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Guidance to track
- Management expects net profit to exceed INR 20,000 crore for the full fiscal year, up from INR 17,400 crore last year.
- Management reiterated its guidance to achieve a CASA ratio of 32% by end of FY26, despite balance sheet growing at 14%.
- The bank aims to reach a 60:40 split between RAM (retail, agriculture, MSME) and corporate loans by next fiscal year.
- Management expects credit cost to stay well below 1% going forward, even with ECL implementation in March 2027.
Risks flagged
- If RBI cuts rates further, NIMs could face additional pressure as 45% of loans are repo-linked while deposit repricing lags by 9-12 months.
- New expected credit loss norms from March 2027 may require higher provisions, especially for smaller accounts below ₹5 crore.
- With balance sheet growing at 14%, maintaining CASA at 32% is challenging; management acknowledged the difficulty.
- The bank made a precautionary provision of INR 380 crore on a Telangana drinking water project in SMA, indicating potential stress in state-level exposures.
Key quotes
- Our global business has year-on-year growth as recorded at 13.55% and stood at INR 2,678,963.
- We are confident that we can recover approximately INR 5,000 crores from written-off accounts every year.
- Our digital journey only has brought this glory to this bank. Last three years, four years, whatever we have spent, that has started giving the results.
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