Canara Bank Q2 Results: Profit Rises 43% On Lower Provisions, Beats Estimates

Canara Bank Ltd.'s second quarter profit rose on lower provisions, beating analysts' estimates.

The lender's net profit increased 43% year-on-year to Rs 3,606.1 crore in the quarter ended September, according to an exchange filing. Analysts polled by Bloomberg estimated a net profit of Rs 3,413 crore for the July–September quarter.

Net interest income, or core income, for the bank rose 20% from last year to Rs 8,903 crore. Other income fell 3.9% year-on-year to Rs 4,634 crore.

The net interest margin for the quarter contracted 5 basis points sequentially to 3%.

In terms of margin outlook, K Satyanarayana Raju, managing director and chief executive officer of Canara Bank, said that the margin may inch higher if the liquidity conditions in the market improve, but if the status quo is maintained, margin will be rangebound between 2.9-3.05%.

The cost of deposits rose by 23 basis points quarter-on-quarter to 5.35%, while cost of funds rose by 10 basis points sequentially to 4.86%.

Domestic deposits grew by 8.22% year-on-year to Rs 11.43 lakh crore, while domestic gross advances were up 12.59% year-on-year at Rs 8.78 lakh crore, for the quarter ended September.

Infrastructure, sectors associated with production-linked incentive schemes, power and renewable energy are key demand drivers from the corporate segment, Raju said.

"We are cautious in our approach to corporate lending, with a greater focus on the rural, agriculture and allied, and MSME segments," he said.

The CASA ratio for the quarter was down 85 basis points sequentially at 32.15%.

The bank does not see any rate hikes for CASA deposits in the near term to attract growth, and this can be achieved through the improvement of banking services, Raju said.

Asset quality for the lender improved with the gross non-performing asset ratio falling 39 basis points sequentially to 4.74%, as of Sept. 30. The net NPA ratio also improved by 16 basis points quarter-on-quarter to 1.41% during the quarter under review.

Provisions for the quarter fell 28% from a year ago to Rs 2,608 crore.

Provision coverage ratio improved to 88.73% this quarter, from 85.36% last year.

Fresh slippages declined by 18% year-on-year to Rs 2,894 crore. Cash recoveries and upgrades were lower by 45% year-on-year to Rs 1,869 crore.

Raju said that across segments, the bank noted slippages of approximately Rs 800 crore from the agriculture portion, Rs 900 crore from MSMEs, Rs 400 crore from retail, and the balance of Rs ~750 crore from corporates.

Recoveries in written-off accounts were higher year-on-year by 49% at Rs 1,791 crore.

Shares of Canara Bank rose 2.16% intraday on Thursday before closing 1.77% higher as of 3:30 p.m., as against a decline of 1.39% in the benchmark NSE Nifty 50.