Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canara Bank (BOM:532483, Financial) achieved an all-time high global business of INR22.73 lakh crore with a year-on-year growth rate of 11.31%.
- Net profit reached INR3,757 crore, marking an 18.33% year-on-year growth, the highest in the bank's history.
- Net interest income increased by 11.18% year-on-year, standing at INR9,580 crore.
- The bank's return on assets improved to 1.01%, a year-on-year improvement of 20 basis points.
- Gross NPA declined to 4.23%, a year-on-year decrease of 112 basis points, and net NPA stood at 1.27%, a decline of 46 basis points.
Negative Points
- Guidance for credit growth in the next year is slightly softer, with a projection of 10%, which is conservative compared to the bullish market expectations.
- The new RBI draft circular on provisioning norms could potentially impact the bank, though the exact impact is still unclear.
- Operating expenses saw a sharp rise due to one-time IT-related expenditures and increased pension provisions.
- The cost of deposits has increased, with the average cost of term deposits ranging from 6.25% to 6.5%.
- The bank's guidance for net interest margin (NIM) is 2.90%, which is 17 basis points lower than the fourth quarter exit rate.
Q & A Highlights
Highlights of Canara Bank (BOM:532483) Q4 FY24 Earnings Call
Q: Your credit growth guidance for next year seems softer compared to FY24. Can you explain the rationale behind this? Also, your margin guidance of 2.90% is lower than the fourth quarter exit rate. Can you comment on this?
A: We provide conservative guidance but aim to outperform. For FY24, we guided 10% growth but achieved 11.34%. For FY25, we expect a minimum of 10% growth, likely around 12%. The 2.90% NIM guidance is a conservative estimate; we aim to maintain 2.95% to 3%, assuming current liquidity conditions persist. If liquidity eases post-elections, margins could improve.
Q: What is your marginal cost of deposits?
A: The incremental cost of term deposits is around 6.5% to 6.75%. The overall cost of deposits increased from 5.4% to 5.50% last quarter. Despite this, we managed to improve our NIM to 3.07% due to better yield on advances.
Q: What drove the sharp rise in operating expenses, and what are the pension provisions made this quarter?
A: The increase in staff costs is due to the bipartite settlement and additional pension provisions of INR350 crore. Operating expenses also rose due to one-time IT-related expenditures. We expect staff costs to stabilize around INR4,000 crore to INR4,100 crore per quarter.
Q: What is the outstanding standard provisions on your books, and what is the PCR against the restructured book?
A: Our restructured portfolio stands at INR17,000 crore, with INR12,000 crore as standard assets. We maintain provisions as per regulatory requirements, with additional provisioning of INR1,800 crore for future readiness.
Q: What is your strategy for improving CASA, and what initiatives are you taking?
A: We are focusing on new products and digital initiatives to attract younger customers and high-net-worth individuals. Recent products like Canara Angel and Canara Heal have shown promising results. We aim to achieve 33% CASA this year and 35% in the next two years.
Q: What is the impact of the new RBI draft circular on your provisioning and capital?
A: The guidelines are still under review, and we are seeking clarifications. However, we are well-prepared to handle any impact, sharing part of the burden with borrowers and absorbing the rest. We don't foresee significant pressure on our bottom line or capital.
Q: Can you provide details on your project financing exposure?
A: Our project financing exposure is approximately INR1 lakh crore, but this figure may vary based on regulatory clarifications regarding floor limits and project costs.
Q: What is the average yield on your corporate loan book, and are there plans to shed low-yielding loans?
A: The average yield on our corporate loan book is now 8.05% to 8.17%, up from 7.02% a year ago. We are gradually reducing exposure to low-yielding loans as they come up for renewal.
Q: What is the guidance for recoveries from written-off accounts?
A: We have a portfolio of INR68,000 crore to INR72,000 crore in written-off accounts. We expect to recover INR4,000 crore to INR5,000 crore annually from these accounts.
Q: What is the impact of the new RBI regulation on reclassification of investment portfolios?
A: The new accounting guidelines added about INR1,400 crore to our reserves. Our HTM portfolio, which is more than 80%, provides ample scope for future profitability as yields come down.
Q: What is your outlook on margins for FY25?
A: We aim to maintain NIM around 3%, assuming current liquidity conditions persist. If liquidity improves, margins could see a positive impact.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
