Canara Bank (CANBK) Earnings Call Transcript & Summary

Good evening, everyone. On behalf of Antique Stock Broking, I welcome you all to the Canara Bank Q1 FY '27 Earnings Conference Call. I would like to thank the Canara Bank management team for giving us the opportunity to host the call with us today Shri Brajesh Kumar Singh, MD and CEO; Shri Hardeep Singh Ahluwalia, Executive Director; Shri Bhavendra Kumar, Executive Director; Shri S.K. Majumdar, Executive Director; and Shri Sunil Kumar Chugh, Executive Director. With this, I now hand over the call to the MD sir for his opening remarks, post which we will have a Q&A session. Thank you, and over to you, sir.

Good evening, moderator and at the same time, all my respected analysts. We have just declared our quarterly results today. numbers according to me are good. market has also taken. So let me put forth some of the performance highlights first, then we'll go for question and answer. Global business has grown by 14.37% Y-o-Y at INR 29.05 lakhs crores. At the same time, global deposit has also grown by 11.63% Y-o-Y against at INR 16.11685 crores. Then global advances grew at a handsome rate of 17.9% Y-o-Y at INR 12,093,381 crores. Net interest income has also grown 13.39% Y-o-Y, and it has first time there is a distinction. It has crossed INR 10,000 crores of marks at INR 10,215 crores. Net profit also, we could grow by 2.19% Y-o-Y at INR 4,856 crores. We are very well capitalized. Our CET1 is at 12.9%. There is a gain of 62 basis points Y-o-Y. Total credit CRAR is at 17.17%, 65 basis points gain on a Y-o-Y basis. We have increased our provision coverage ratio at around 95% at 94.76% to be precisely, which is 159 basis points more Y-o-Y basis. Gross NPA has come down 12 basis points Y-o-Y, and it is now at 1.57% only. Net NPA also decreased from at 0.36%, which is 27 basis points less Y-o-Y basis. And then if we talk about ramp credit, retail, agriculture and MSME, it has also grown 21.20% Y-o-Y basis. And as of 30 June, it is [indiscernible]. Then retail credit out of the [indiscernible] has grown at 35.88% Y-o-Y and placed at [indiscernible] Housing loan between the retail credit space has grown very good at [ 17.5% ] of Y-o-Y and placed at [indiscernible] loan has grown a little hard at 26.3% Y-o-Y and placed at INR 27,315 crores. 15.12% of Y-o-Y growth we have [indiscernible] under MSME, and it is at INR 1,068,815 crores. 2.19% growth we have given Y-o-Y basis on earnings per share that is placed at 21.47%. Y-o-Y credit cost has also reduced by 23 basis points and now it [indiscernible]only. Slippage ratio is contained at [indiscernible] which has improved by 20 basis points Y-o-Y. So whatever the performance we have given, we have better everywhere on account of guidance, whatever we have given. See, business growth, we gave guidance of 10% to 11%, which is now at 14.37%. Advance growth we said will grow by 10% to 12% we have grown by 17.97%. [indiscernible] than it is at 11.63%. CASA, we said that it will be between 30% to 32%, but that guidance was for March '27, we have 29.7% as of now. We said we will be protecting it between 2.50% to 160%, and we have kept that at 2.52%. We are able to protect our NIM. Gross NPA, we said 1.50%, March '27 annual full year guidance. And against that, we have already reached 1.57%, 112 basis points we have already reduced Net RPA, we said 0.40% for annual target, which we have surpassed as of now only at 0.36%. PCR also, the provision coverage [indiscernible] but we have this thing raised it to 94.76% we have better data there. Slippage as you said, [indiscernible] we said that our slippage. We will be continuing at 0.8%. We have continued at [indiscernible] Trade cost basis at 0.75%, which has improved at 0.51% only. Return on equity, 16.50% we said. Now it is better at 18.07%. Earnings per share also we said 20%, now it is 21.47%. Return on average asset we said it will be hovering between [indiscernible] and we are towards the higher side of it. That is what is that 1.04%. So you'd see everywhere, whatever the guidance we have given, we have kept those guidance. We have better those guidance. And again, our performance -- should we see in perspective of the total ecosystem, how our peers have fared and how we have it. So that's all from my side. I hope it is liked by [indiscernible] we are open for any other clarification in this regard.

[Operator Instructions] We will take the first question from the line of Ashok Ajmera.

Compliments to you sir and the entire team of Canara Bank. You rightly said that we will appreciate your results. Yes, we are definitely appreciating sir. Because on most of these all parameters you extend -- I will then the targets given. And the bank is now in the range of now INR 20 lakh crore business time soon touching INR 39 crores and very, very sound asset quality also. Your PCR also has increased to [indiscernible] So yes, progress and on all the fronts. Having sense some observations and some clarifications. Number one is this, sir, on the SMA side, number our SMA 0 has gone up whatever numbers are given from INR 862 crores to INR 315 and there is a migration from SMA-1 to SMA-2, like SMA-1 is reduced, but SMA 2 has also gone up from INR [ 1,3194 ] to INR 3,482 crores. So is it the normalized things? Or can it be seen in view of the present geopolitical situation or some stress building up in some of the MSME or retail accounts that the SMA 2 numbers have gone up from [indiscernible] crores, and even SMA-0 also has started. So some color on that. And based on that and connecting to that only, for this ECLGS 5, what is the assessment made by us for the total eligible accounts how much amount has been sanctioned and disbursed on that. So this is my first question [indiscernible] I want you take sir.

I'll answer one by one. So first question, you say [indiscernible] SMA-2 hedge increase. But at the same time, I see SMA-1 has decreased. So what has happened, there are 3, 4 accounts which are with every bank is a consortium finance. But these accounts are government don't guaranteed account, they keep on oscillating between SMA-0, 1 and 2. So I cannot take the name of the accounts, but they are high-value account, but it will level the great concern is government guaranteed. And for quite some time, it is [indiscernible] between 0, 1 and 2. So one account only has shifted from 1 to 2. But as of now as we speak, it's come down to SMA-0. So there is one account that this account has gone from SMA-1 to SMA-2, but now it is corrected. It's directed. Again, same thing has happened in my account, which was out of those 3 accounts only. It was out of SMA. But again, it has due to some problem at on the last day, it has come in , but now it is out of SMA-0 also, so there is nothing to worry. It is only due to 2x, one account entered into SMA-0 now we talk, it is out of it also. And one account got shifted from 122 but keeps on oscillating from one account to another account. To take -- so nothing to worry sir, it is well controlled. And if total SMA if you'll see, it is only less than 3%. It is some of the industry best number. And we do not see any stress in our large corporate book. So a little stress will be always there in MSME and agriculture, but that is also content less than 3%. Then the second question, we have identified around INR 90,000 crores worth of rupees of account, which are either to be eligible for emergency line of trade [indiscernible] Out of that, we see a positive of around INR 18,000 crores of advances based on their eligibility. Out of that also, we have already sanctioned INR 11,000 crores plus amount. And out of that, also INR 10,000 crores is already disbursed. So we see 5,000 to 6,000 considering everybody is not taking it also. So whoever is taking, we are lending. It is done through [indiscernible] and there is hardly any pendency on [indiscernible] portal also. But this is a dynamic situation. People keep on upping and where we have this provided all those eligible accounts leased to all our [indiscernible] -- to our branches, our regions and circles. They are also along with them, explaining the benefits of taking emergency line of credit. So that is how we are placed, INR 10,000 crores plus disperse, INR 11,000-plus Sansan, total domain is INR 18,000 crores. So we see INR 5,000 crores, INR 6,000 crores more there. This has helped in our good growth in our advances also, sir.

At 45% in this quarter, and some of this might spill over in the next quarter, see advanced growth is going to be robust even in the coming quarters also because of this. Something on fee income side, sir, on the income, the treasury income has contributed substantially in this quarter even in many of other banks also. I mean beyond INR 1,000 crore treasury thing. And another one is the PSLC commission also and other income, if you see -- it is INR 1,947 crores as against INR 393 crores in the last quarter. Whenever I compare generally, I compare with the last quarter only, but it's a dynamic thing. And considering with the worker earlier may not be realistic sometimes. So this kind of trend and the other income, which has contributed substantially to this higher profit whether it is going to continue or it's a onetime like PSLC might accrue in the coming quarters also and some of the other income also. And along with that, on the provisioning side also, there is other provision of INR 680 crores in this quarter as compared to INR 319 crores of the minus provisioning or deprovisioning in the last quarter. So both of these have relevance with the profit and loss account -- profitability of the bank. If you can give some color on that, sir.

So I'll start with first treasury income, sir. So treasury income is not there what it was there in the same time in the June quarter 2025, sir. That time, yields were softened, so we could earn through treasury operations by sale of investments. And at the same time, RBI had their on presence also. So we could earn through arbitrages also. So last time during the same quarter, it was INR 1,617 crores which is not available this quarter, considering there is no arbitrage available also yields have also hardened you have seen, so there is no fun in going and selling our investments. So we could only earn INR 654 crores by way of sale of investments. So there is not again but dent of INR 1,000 crores. But at the same time, we at least at PSLC, we will go to PSLC. So PSLC has got some [indiscernible] which happens in the -- mostly in the first quarter. and little bit discovers second quarter. But that is not available across all the quarters. So yes, we have earned very handily on account of sale on distinct sector lending, PSLC certificates. That is very good. Last year also, we could own in the first quarter, INR 1,684 crores, but this time, it has better that [indiscernible] crores. You rightly said last quarter, in March quarter, hardly any PSLC has happened, sir, so [indiscernible] here and there somebody lagging behind that. So that's what answer of your second question. Regarding provisioning, sir, yes, we have done a good provision in this quarter. Last quarter, at least said you compare it quarter-to-quarter. Last time, total provision in March '26 quarter 1 was INR 2,252 crores. This time, our provision is around INR 3,780 crores. That is more than INR 1,500 crores more we have provided. So that is all basically on 2 counts. So first is on income tax distinction provision we have made. Another [indiscernible] in others, you see, last time, it was INR 869 crores less provision while that was the negative, which is INR 489 plus this time. So INR 300 crores we have provided, sir, for PLI for staff. Performance-linked incentive that is INR 300 crores. It's not here. Okay.

So my last question in this round, sir. Did you get it, the figure [indiscernible]? .

No, no, it's okay. So we have provided [indiscernible]

Sir, how are we prepared on the ECL front, sir? What is the total assessment because now the numbers are clear now? And how are we moving about providing whatever amount is required to be provided how prepared we are on that.

Somehow we've got the idea about Stage 1, Stage 2 and Stage 3. So there, we see around INR 10,000 crores of [indiscernible] extra provisioning we'll be needing. But at the same time, our provision coverage, the CEO is touching 95%. But we do not have exact idea about M2M, what happens on [indiscernible], what is the market that time. So that will -- nobody has got that idea, sir. That is a dynamic situation. But whatever is known in the known thing known knowledge, that is INR 10,000 some plus crores. So even if we consider INR 2,000 crores there mark-to-market, so it is INR 12,000 crores, extra provision will be requiring. But considering the kind of profit we are taking last INR 19,000 crore plus more INR 90,000-plus crore profit we have made this year also in the first quarter itself, INR 4,356 crores profit, net profit we have made even we analyzed, we will be again making around everything goes correct, around INR 90,000 crores of profit. So high profit and our capital adequacy would have seen it is at 17.17%. Even if we [indiscernible] we talked about it 15%. And if you see [indiscernible], 12.9%. So we are very comfortably placed against the regulatory requirement of 11.50%. So the total dent on capital adequacy ratio, even if we provide it in 1 year only, whereas we have got the dispersion of 5 years, we [indiscernible] in 1 year, there will be 1.2% to 1.25% of debt. So the biggest, and we are trying to provide it in 2 years, not in 5 years, maximum in 2 years. So still there will be no substantial impact even if we are not raising any capital, we will be very peacefully selling through new norms of ECL. Technological preparedness and other things through knowledge partners, it is all in place via PD, LGD and EAD, all -- we have got all those modalities in place. And by October, we'll be having that dry run. So I guess we will be on technological aspect also and on capital aspect, we'll be very comfortable in going through the ECL process.

We will take the next question from the line of Jai Mundhra.

I wanted to check, sir, on the strategy part. You have come from Indian Bank, which has very clear balance on growth and profitability. They have the highest NIM within almost all PSU banks. And Canara Bank has actually one of the lowest NIM because of the lower CASA and maybe higher share of bulk deposit. So I wanted to understand, sir, how do you look at NIM and CASA balance at Canada Bank over the next 1 year? Do you want to focus more on NIM or you think that 2.55% kind of NIM is a decent outcome and you would focus more on the growth? How -- I mean, do you have an opportunity now to fix the liability? Or you think this is reasonably good for [indiscernible]? .

Okay. Rightly, you said, I've got experience of Indian Bank also, which is one of the most efficient bank, I would say. But at the same time, I'm having experience of 28 years at [indiscernible], which is on both side, [indiscernible] growth side or the balance sheet side. And at the same time, Canara is also a big bang bank. Now we are in excess of INR 29 -- 39 lakh crores of business. So as fast focus and preference will be on efficiency parameters only. Growth is also important, but at the same time, I would like to be doing giving more emphasis on efficiency parameters. Rightly said, our NIM is towards the lowest side. I come from a bank where aims always all time -- that time is by 3.3% to now it is hovering around 3.50% also. But yes, we have started working on those parameters. Yes, our dependency on [indiscernible] project is more considering our CASA percentage is less than 30%, around 9.70%. So that, we have started working and very heartening to note also you would have seen in our presentation also that our individual savings saving individual, not institutional, I'm talking. Increased by 12.48%. Then again, there is a very good traction in retail turn [indiscernible] also, that is at 9.10%. So that is a good growth considering the tight market at present. So we are focusing by way of good quality products by a good way of placing by good way of pricing and we are working on delivery channels also. We want to have good traction in SV individual and retail [indiscernible]. So we have come up with very nice products also. And so our endeavor is to slowly and steadily replace those how cost all deposit through not necessarily 100% by CASA, but through retail deposits. Again, this good dispensing, we have given guidance that we'll be going to get around 2.5 billion of [indiscernible] taken together. So which will also help us in reducing and replacing those [indiscernible]. Considering this is coming at 6.5% only. And again, there is dispenser of CRR and SLR also. So there will be a further saving of 25 basis points there also. So it will be costing less than what we are as of now holding in [indiscernible]. So that way, there will be -- and again, whatever the growth we are getting in deployed, we are deploying it very gainfully considering very tight and quality underwriting and keeping our credit cost, you have seen a very controlled way. So both sides, we are working on yield on advances also and cost of [indiscernible] also. And you've seen that we have grown our CDS also from 75 to 80 yield on fund and not investment is 6.9 where our yield on investment is around advantage is 8%. So again, we will get 110 basis point trucks there. So that will help us in. We will be certainly protecting our NIM, and we'll be further growing on it. Again, that 100% basis points dispensement given last year in report by [indiscernible] cut, that has also been fully materialized and it is plateau now and cost of depot also kind of stabilized, and we are getting further growth towards low-cost deployed and replacing well. So we'll protect and we'll even take it further. I'm sure I'm hopeful.

No, sir, actually, the question is right now, there is a balance. I mean most banks cannot target above industry growth and still deliver, let us say, higher NIM, right? Even for Canara Bank, we have grown loans at 18%, 19%. NII is 13% -- 12%, 13%, right? So currently, the growth is not NIM accretive. So if this situation remains, would you be growing at 8%, 9% which is higher than an industry or you would be focusing more on, let's say, growing in line with your SAR growth, which is 12%, 13% and thereby protecting them or you would be leaned towards higher growth and higher NII versus NIM. So that is the question, sir.

Okay. So this year, there was a special growth under emergency line of [indiscernible] also, around INR 11,000 crores. We have [indiscernible] there also. And that -- but -- it has happened towards -- it was, I think, any place across the quarter. So it has not happened in the first quarter. That's why you see that effect will come next. It will start coming from this quarter. Considering there we are getting 1% more also. So whatever the incremental advances we are doing, considering good credit underwriting also, but we are doing it gainfully, I said in a guarded way, but we are doing it at a good rate, better than our average yield also at sometimes we are doing. . So it will further improve. Now first thing is efficiency, then only growth. But we will be striking a balance. We can't be stagnant also considering everyone has got different characteristics. This is a high business outstanding bank. At the same time, NIM also if we improve. So you consider at 2.5%, we are making INR 19,000 crores of profit. Even if we are this thing moderating towards in our favor a little bit also. So that will give us good district traction on net profit also, sir.

Right. Sir, just on this point. So sir, what would be your blended cost of bulk deposit, rough guess will also help. .

Okay. So this -- this is -- month over month. So every month, we are having a gap of -- in our favor around 29 to 30 basis points, whatever the bulker existing depots going outflow and whatever the inflow is there. So we are -- that way, we are correcting it, 20, 30 basis points here and there. Last month, it was 6.58%. So -- but it is to be correct everywhere.

So sure, when we have a yield at 8% and bulk deposit is anywhere between 6.5%. So clearly, as long as -- I mean, you can gain NIM if you shared bulk and maybe grow a little bit softer on the overall deposit side, right? Because your incremental margin on the bulk deposit is around 1.5%, which is lower than the blended. So I wanted to check, sir, would you be keen on having higher growth, thereby higher NII? Or would you be more focusing towards taking this NIM of 2.5% towards maybe 3%? Do you have a choice, right?

No, no, no, it's what I say, there is -- we have to strike a balance. Overnight, we cannot [indiscernible] 2.5% to 3%. But what we are doing now incrementally, you take example, we have said that we will raise [indiscernible] around say INR 2 billion. So that was INR 20,000 crores will be coming. This, we are waiting at 6.5%. Again, there is benefit of that negative carry of [indiscernible] that dispense on is also there. So it will be costing us around 60-some percent. So again, there is a traction of 30 basis points. So it will all help us. So we are mindful of both the things. We are mindful of growth also, and we are mindful of this thing leverage is also there in.

We will take the next question from the line of Mr. Mahrukh.

Congratulations, sir. Sir, I had a few questions. Firstly, on the FCNR deposit mobilization. [indiscernible] do you think you can mobilize? That's my first question. And of course, Jay discussed a lot on margins. I just wanted to know the near-term outlook on margins. right? Because you said that every month, the incremental deposit cost kind of comes down. So what will be your margin outlook for the next 2 to 3 quarters?

Yes. First question first, FCNRB has said, we have given guidance of $2.3 billion to $2.5 billion. And against that guidance, we said this month, in the month of July, we will raise $750 million. Again, that already, we have raised $775 million. And within these 4, 5 days left in this month, we will be -- our endeavor will be to cross $1 billion. So that is our guidance on FCNRB and how much we have received. Then you have asked about this near-term guidance on -- so we have given guidance of 2.50% to 2.60%. We will try to better it. But even if we are maintaining at 2.60, you have to say, you have to see in the total backup of the ecosystem. So everybody has lost on account of this thing a NIM. But still, we have protected our NIM, and we have all the aspirations, and we have all the, I guess, ability to raise it further even more than 2.2%, but guidance remains at 2.60%, 2.5% to 2.60%, considering the very tough and many headwinds in the ecosystem.

We will take the next question from the line of Ashlesh.

Sir, first question is about this comment which you made that in -- it is happening at a higher price. Can you just elaborate a bit more on this part? How are you able to do this?

So could you please come back? I could not hear you properly.

Sir, you made a statement but incremental lending that you're doing is happening at a higher price. Correct me if I heard you wrong. Can you just elaborate a bit more on this part?

Your voice is breaking. I could not get you.

The price, what you want to know?

Hope this is better. You made a statement that you're seeing the incremental price of lending going up. Can you just elaborate on how you are able to do?

See, we were having some sub 7 distinct lending also. So that we are [indiscernible] whenever it is coming to reset we are resetting in our favor. And sometimes we do not mind taking prepayment also. But incrementally, wherever we are doing a market is also a little better now. So wherever we are doing is we are not hiring for the growth only. we are getting good terms there also. And you would have seen, again, in our total advances mix, our ramp percentage has gone by 1% from 58% to 59% has gone. I know there are many benefits of having this thing growing ramp, considering the better leverage also their diversified risk also. I mean, less credit cost also and at times, practice sector reckoning also. So that way, we are trying to improve. On every proposal, we are very mindful, and we are approaching it from efficiency angle also.

Sir, just one follow-up there. When you say market is getting better, which segments are you referring to here? Is it only corporate? Or are you seeing that trend across retail and MSME segments also?

Corporate, I would say, if I -- other buy, these are all targeted lending, retail and agriculture and MSME. These are all more or less on the similar lines, similar lines. But in corporate, we are getting good tracks, and we are asking and we are getting also good rates. A bit better quality also.

Sir, and in the corporate, I see that the better-rated corporate has grown much faster than the lower rated corporate. Do you expect that trend to continue here on?

Yes. Also, in our total book, now 86% of our book is [indiscernible] that has grown [indiscernible] from last time also. We are getting the tracks at better at a corporate also.

We will take the next question from the line of Parth Gutka.

Sir, in the interest income line item, is there any one-off for the quarter? Or what was the interest on IT refund for this quarter? .

Okay. So there is not one of them, whereas we are listing an adversely placed on this time. Last time, we had good interest on ITD fund also. This time, that is not available this time. So that is not that much what it was last time. So there is not much one-off things. These are all this thing organic only.

And my second question is, what was the interest on recovery from written-off accounts in the interest income line item for this quarter? .

Okay. Interest on IT fund this time was INR 247 crores only, which was quite more in the last quarter same time. And the recovery interest towards NPA and write-off is only INR 258 crores. So that is also less than -- it was INR 382 crores last time. This is [indiscernible]. Last year, interest on IT fund was INR 690 crores. This time, it is INR 247 crores only. So that way this -- like I said, these are all -- there is no one-off distinct case in any of the interest component.

Okay, sir. Fair enough. And my second question is the PSLC income has picked up in Q1 to INR 1,600 crores or INR 1,700 crores odd. What is the target for the full year here?

No target for full year assets, whatever PSLC still happens, that happens in the first quarter or little part of the second quarter. So there is you'll see hardly last -- this last quarter, March 2026, if you talk about, there is only INR 393 crores of income. So whatever happens, it happens in the first quarter, mostly in the first quarter and little part in the second quarter only. So I guess I can give that we have already gained, but there will be some traction, INR 200 crores, INR 300 crores here and there, but not as much as what we could book in the first quarter itself. Second quarter, something will be there.

Okay, sir. Fair. And sir, my last question is, despite the proportion of RAM segment going up, our yields have declined in this quarter. Any particular reason for the same?