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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.
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Guidance to track
- Management expects domestic advances to grow around 11.5-12% for FY24, driven by RAM and selective corporate lending.
- Despite one-time wage provisions, management is confident of achieving cost-to-income below 45% by Q4 FY24.
- Net interest margin is expected to remain close to 3% despite pressure from rising deposit costs.
- Bank plans to raise remaining AT1 and Tier 2 bonds of INR 6,100 crore when market conditions are favorable.
Risks flagged
- Management acknowledged that cost of deposits is rising and NIM may face pressure, though they aim to keep it near 3%.
- CASA growth (5.05% YoY) lags deposit growth (8.55%), impacting funding costs. Management has launched campaigns but no near-term target given.
- Fresh slippages of INR 2,697 crore were largely from MSME (INR 1,200 crore) and agriculture (INR 1,000 crore), which could persist.
- RBI's higher risk weights on NBFC and personal loans reduced capital by 52 bps; CET1 ratio fell to 15.78% from 16.20%.
Key quotes
- First time we have crossed a five-digit figure. The net profit, last year net profit was INR 10,604 crore. In the first, this current financial year, in the first three quarters itself, nine months, we could surpass that last entire year's the net profit of 10,000.
- First time, our credit cost has gone below 1%. Now, our credit cost is at 0.97%, with a year-on-year decline of 24 basis points.
- We don't want to grow a balance sheet at the cost of bottom line.
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