Canara Bank Q2 net profit rises 43%, NPAs decline

Bengaluru: Public sector lender Canara Bank on Thursday reported a net profit of Rs 3,606 crore for the July-September quarter of FY24, up 43% from Rs 2,525.5 crore from the corresponding quarter of the previous fiscal. 

The lender's net interest income (NII) grew by 19.76% to Rs 8,903 crore, while the net interest margin (NIM) improved to 3.02%, registering a growth of 19 basis points. 

Several initiatives taken by the bank in the first quarter to focus on the current account savings accounts (CASA) have started giving results this quarter. We have observed the turnaround from the last three quarters in this quarter, the bank’s managing director and chief executive officer K Satyanarayana Raju informed. 

According to industry experts, a PSU getting NIM in the range of 3% (comparable to private banks) is a good sign. “This is driven by the retail credit. The one benefit that Canara Bank has over its private peers is that 55-60% of its branches are in rural, semi-urban India - there has been a better consumption story there,”  explained Shravana Shetty, banking/market analyst- Primus Partners adding that food inflation led to better prices for crops. 

The retail credit showed a healthy growth of 10.56%, with housing loans expanding 12.32%, while education and vehicle loans also saw substantial year-on-year growth, at 14.68% and 9.29%, respectively. RAM (retail, agri and MSME) Credit also expanded by 13.63% to reach Rs. 5,16,949 crore, representing 56% of total advances.

“Private capex however has not picked up. Both MSME and corporate lending are weaker as investor confidence is lacking owing to the muted growth rate of India, coupled with the global economic headwinds. Exports, which are the major driver, have not grown as expected due to global growth concern,” Shetty said. 

The bank’s asset quality improved significantly, with the Gross Non-Performing Assets (GNPA) ratio sliding to 4.76% from 6.37% in the corresponding quarter a year ago. The Net Non-Performing Assets (NNPA) ratio decreased to 1.41%, down from 2.19% in the same quarter last year. Its operating profit improved 10.3% to Rs 7,616 crore in Q2 as against Rs 6,905 crore in the corresponding quarter a year earlier. 

“The entire banking system has done well in terms of clearing their books. This allows banks to actually start lending more, on the back of a better credit deposit ratio,” Shetty underscored.

In Q2, deposits of the bank stood at Rs 11.43 lakh crore, growing by 8.22% and domestic advances stood at Rs 8.78 lakh crore growing by 12.59%, Raju informed. 

He added,  “We are not finding any difficulty in raising the deposits. Our retail term deposits in just six months could garner Rs 20,000 crores without any changes in the rate of interest. Even quarter-on-quarter we have 3.05% growth in retail terms deposits. In the near future, we are not looking at increasing the rate of interest on the low-cost deposits because we believe it comes by service and not interest.” 

In terms of business performance, global business increased by 10.12% per year over year to Rs 21,56,181 crore. Meanwhile, domestic business went up by 10.08% to Rs 20,21,650 crore.

“The banking sector, as reflected by the Nifty Bank Index, has displayed a robust performance this year. It reached a record high in Q2 FY24, though it concluded the quarter with a slight dip. The Nifty PSU bank index has outpaced both the overall banking index and the private bank index, posting gains of close to 10% and 28% during the first and second quarter, respectively,” said Sugandha Sachdeva, a market expert.