Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canara Bank (BOM:532483, Financial) reported a net profit increase of 11.31% year-on-year, surpassing the quarterly net profit mark of 4,000 crores for the first time.
- The bank's global business grew by 9.42%, with global deposits and advances increasing by 9.34% and 9.53% respectively.
- The gross NPA ratio improved, decreasing from 4.14% in the previous quarter to 3.73%, indicating better asset quality.
- The bank's credit growth was led by the RAM sector, with retail credit growing at 31.27% and housing loans crossing the one lakh crore mark.
- Canara Bank's return on equity was maintained at a strong 20.44%, exceeding the guidance of 18%.
Negative Points
- The net interest margin (NIM) slightly decreased from 2.9% to 2.88%, reflecting pressure on margins despite efficient resource management.
- The cost of deposits remains high at 5.7%, partly due to a lower CASA ratio of 31%, which is higher than peer banks.
- The bank's credit cost increased from 0.92% to 0.97% quarter-on-quarter, although it remains below the guidance of 1.10%.
- There is a significant exposure to a steel sector account in SMA-2, contributing to rising SMA levels.
- The unsecured personal loan portfolio, although controlled, includes a substantial portion of educational loans, which could pose a risk if not managed properly.
Q & A Highlights
Q: Can you explain the significant growth in the retail book, particularly when home and vehicle loans have only grown by 3%?
A: The growth is primarily due to a new gold loan product introduced in metropolitan cities, which has been well-received. The gold loan portfolio has grown significantly, contributing to the retail growth. (Unidentified Corporate Speaker)
Q: What is the current status of the SMA-2 accounts, particularly the government steel exposure?
A: The SMA-2 accounts include a significant steel exposure and a state government account. The steel exposure has a 15% provision, and the state government account is backed by a guarantee, reducing concern. (Unidentified Corporate Speaker)
Q: How are you managing the pressure on margins, and what is the outlook for NIM?
A: The bank has been shedding low-yielding advances and focusing on higher-yielding ones, which has improved the yield on advances. However, due to high deposit costs, achieving a NIM above 3% in the near term is challenging. (Unidentified Corporate Speaker)
Q: What is the outlook for credit growth, given the recent slowdown?
A: Despite a slow start, credit growth is expected to pick up, with a projected growth rate of around 11% for the year. The focus will remain on the RAM sector, which is growing faster than the corporate sector. (Unidentified Corporate Speaker)
Q: Can you provide details on the unsecured personal loan portfolio and its impact on NPAs?
A: The unsecured personal loan portfolio is approximately 18,000 crores, primarily to pensioners and salaried individuals. The NPA ratio for personal loans is low at 0.52%, indicating effective risk management. (Unidentified Corporate Speaker)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
