Canara Bank (CANBK) Earnings Call Transcript & Summary

So let's start. Good evening, everyone. Welcome to Canara Bank's Q4 FY '26 Earnings Conference Call. I would like to thank the Canara Bank management team for giving us the opportunity to host this call. From the management side, we have with us Shri Hardeep Singh Ahluwalia, Executive Director; Shri S K Majumdar, sir, Executive Director; and Shri Sunil Kumar Chugh, Executive Director. With this, I now hand over the call to MD, sir, for his opening remarks, post which we will start the Q&A session. Thank you, and over to you, sir.

Good evening to all. Let me first share the highlights of Canara Bank results. So our global business stood at INR 28.0 lakh crores, and it grew by 12.11%. Our global deposits grew by 9.71% and stood at INR 15.68 lakh crores. Our global advances grew by 15.30% and stood at INR 12.37 lakh crores. Net interest income for the quarter was INR 9,808 crores. It grew by 3.88% Y-o-Y. Our operating profit for the full year is INR 33,019 crores and it grew by 5.19%. Our net profit for entire year was INR 19,187 crores and it grew by 12.69%. Our provision coverage ratio improved by 151 basis points and stood at 94.21%. Our credit cost, it reduced by 33 basis points and stood at 0.59%. Our GNPA for the entire year, there was a Y-o-Y decline of 110 basis points and stood at 1.84%. Our net NPA, there was a decline of 27 basis points year-on-year and stood at 0.43%. We are proposing a dividend of 210% of paid up capital. And our share price is 2. So the proposed dividend is [ INR 4.20 ] per share. Our -- the credit, your advances growth was led by RAM credit. The RAM credit grew by 19.73% and stood at INR 7.30 lakh crore. Retail credit grew by 32.93% and stood at INR 2.96 lakh crores. Housing loan grew by 17.55% and stood at INR 1.24 lakh crore. Vehicle loan grew by 26.33% and stood at INR 26,070 crores. MSME credit grew by 12.85% and stood at INR 1.57 lakh crores. Our earnings per share improved by 12.68% and is at INR 21.15. Our CRAR improved by 71 basis points and stood at 17.04%. Our slippage ratio 12 months is 0.69%, which declined by 21 basis points. So these are the all key highlights of our performance. Joining me is Shri Bhavendra ji, Shri [indiscernible] and all my vertical heads to take all your queries and answers. Thank you.

[Operator Instructions] The first question is from the line of Mr. Ashok Ajmera.

Yes. [Foreign Language]. As far as the business is concerned, the business growth is good. I mean, especially if you look at the credit growth, you have grown in this quarter also by 3.79 or 80%. And overall for the full year, 15.30%. So on the business front, there is no concern. I mean, you are growing well much above the target, which you had given. But sir, however, there is a pressure on the profitability in the bank. I mean both the operating profit and net profit has gone down, which is generally not seen in the other peer 4, 5 banks of your size that the operating profit has gone down by INR 2,361 crores as compared to the last quarter only where I can understand in which there must be some gain of that HSBC Canara, the treasury front. But still the treasury income also has gone down even comparatively also, if you net it out from INR 1,050 crores to INR 272 crores. And the recovery from the return of account also which generally should be better in the March quarter has also gone down to INR 1,646 crores against INR 2,051 crores in the last quarter. So sir, on the profitability front -- and that has resulted in a much lower NIM than the expected and the target also. I think your quarterly NIM was 2.54 and the overall annual NIM is 2.51. So on that, I mean, is there something special, which has been -- which has resulted in this lower profitability in the bank and coming forward, those issues may not be there. How do we see the coming quarter and the coming year now in view of these results?

As our results, if you see that our NIM improved 9 basis points. And our NIM, net interest income, it improved to INR 549 crores. If you compare our peer banks, so our NIM has improved. Our net interest income has improved. Only as rightly pointed, why there is a drop in operating profit and net profit by INR 2,300 crores. So sir, last quarter, we had listing gains from Canara HSBC and Canada Robeco of INR 1,930 crores. So that was substantial enough. Secondly, due to geopolitical situation, the bond yields moved from 6.59 to 7.05, and the share market corrected by 4,000 basis points. So this has resulted into MTM losses of INR 800 crores. This may not be going ahead for the quarter. This may not be there in the June quarter. But the onetime listing gains were factored in, in the last quarter of INR 1,930 crores. And regarding the TWO recovery, generally, our TWO recovery hovers around INR 1,500 crores to INR 1,600 crores. If you see last year for the full financial year, the TWO recovery was INR 6,800 crores. And in this financial year, it is INR 6,500 crores. So they are in the total TWO recovery, there is no substantial debt but only some high-ticket resolutions come in a particular quarter. But normally, it hovers around INR 1,500 crores, INR 1,600 crores per quarter.

No, sir, yes, point well taken, sir. Even I had analyzed it that there were some additional profit in the last quarter because of those 2 listing gains. But having said that, so now this, 2 things are clear now. The RBI has given the clear guideline for the ECL. So on that now, as far as the provisions are concerned, how much buffer provisions to take care of that or the planned provisions which we already have in our books, and how do we plan to meet now going forward, the provisioning norms as per the final guidelines given by RBI.

Sir, if you see that our SMA is best in the industry, it is only 2.75%. While the advances is going up, in absolute numbers, our SMA is coming down. In the December '25, our SMA book was INR 35,000 crores. Now it is INR 33,728. So although the advances is going up, our SMA is coming down. So now coming to the ECL part. Now sir, on ECL front, Stage 1 and Stage 3, both all almost at par with the IRAC norms. Our PCR is 794.20 for Stage 3, it is adequate enough. For Stage 1, it is at par with IRAC norms. Only at Stage 2, we see that in Stage 2, the regulatory floor has been moved from 0.4% to 5%. So some additional provision will be required and we presume it will be INR 2,500 crores. And the probability of default in Stage 1, Stage 2 and Stage 3 will be additional INR 2,500 or maybe it may range up to INR 5,000 also. And additional nonfund requirement will be INR 2,500. Total requirement will be INR 10,000. And it can be staggered to 4 years. And our profit is in the range of INR 19,000 crores to INR 20,000 crores. So bank is in a very, very good position to absorb the entire in the first go itself. If we absorb in the first go itself, then there will be a drop of 1% in the CRAR, and bank is adequately your capitalized. Our CRAR is 17.04, much above the regulatory level.

Yes, sir. So you are well prepared for that. Sir now going forward, the government has also announced because you also refer that there is some geopolitical situation, which is, I mean, which are building up now and the pressure. In fact, in the March, the effect might not have been seen because of the [indiscernible], this [indiscernible] also. But now I think you must have started feeling the heat, and government is equally being a proactive measure has announced [ ECL 5.0 ] creating a lot of offer, I mean, INR 2.5 lakh crores of the planned listing. So in our bank, have we calculated that how many customers -- I mean, how much amount the customer can use through this line and how are we prepared for that? And will it not add to our credit growth, which we already planned? Will it not give a flip to it? Are you feeling any flips already?

Sir, see, this quarter, our slippage was INR 2,771 crores. Last year, in the same quarter, it was in the March because we have to compare from the previous March only. So last year also, the slippage was INR 2,702 crores. This year, it is INR 2,800 crores, roughly. So it is in the similar levels. So in the March, what happened, sir, some MOCs are because branch audit is conducted across the country. So some MOCs are -- we should not compare from the December. We have to compare from March to March. So we don't see any stress building as on date because it is almost at par with the previous March. And out of this INR 2,771, INR 1,333 is for MSME, some slippage has been observed, but not to that extent. And for coming to your point, that ECL 5, the bank has already worked on that one. And the entire portfolio that is affected is about INR 90,000 crores, and the additional exposure will be around INR 18,000 to INR 20,000 crores. Definitely, it will give some flip to the advances.

So going forward, sir, there is no concern according to you, and no concern has seen and been -- I mean, it's building up even in April, May also because of that overseas situation.

No, sir, if you see our slippage ratio at 0.69% and our SMA is 2.75, both our industry based actually. So as on date, no concerns. And going forward, this ECL 5 will definitely help the affected area.

The next question is from the line of Param Subramanian.

Firstly, on the advances growth guidance that you've given of 11% to 12%. So we have closed this year with 15% plus. So any reason we are calling for a moderation in the credit growth next year?

No, sir, actually, bank has a tradition of giving some conservative numbers because GDP growth is projected at 6.9%. And we have seen that earlier guidance has been given by us. And accordingly, it has been projected. I am confident that bank will end up much above the guidance numbers as we ended up in this financial year.

Perfect, sir. Very useful. Sir, secondly, on the PSLC. Sir, some of the private banks, they are facing issues on their PSL compliance? Do we -- would it be fair to assume that next year, our PSLC income will be higher than this year? Or any comment you can give on that?

So PSLC, sir, continuously, our PSLC income is around INR 2,500 crores. We derive that income. And this year also, we are confident that we will derive this PSLC income because we are above -- in priority sector credit, we are exceeding all mandated norms. So definitely, we will gain advantage out of selling the PSLC.

So sir, it should be similar to FY '26 next year?

Yes, sir. Yes, sir. Yes.

Okay. Okay. Okay, sir. Sir, and the comment you made on ECL, I understood the onetime impact. But on the run rate impact of how much it can affect your credit cost on a run rate basis. If you could speak a bit about that, say, from FY '28 and whether a bank can still sustain 1% plus ROA, even after implementing ECL on a run rate?

Sir, our credit cost is continuously coming down. That is because our SMA in absolute number is coming down. If you see that the SMA from 3%, it has come down to 2.75%. And so slippage will be hovering around this range only. So we don't see any threat in coming up.

Sir, even after implementation of ECL, you think you can maintain similar credit cost guidance on a run rate basis?

I presume that we will maintain this because our SMA levels have come down substantially. Somewhere in absolute terms, it was -- the outstanding was INR 35,604. This year, it is INR 33,000. In March, this is INR 33,728. So although my credit is growing at 15%. And if you compare from last March, last March '25, my SMA book was INR 40,481. Now it has come down to INR 33,728. So I am confident that I'll be able to maintain this slippage numbers and credit costs.

Okay, sir. Sir, one last question. Sir, on NIM. You have given your guidance. But will you have passed through the entire December rate cut? And from here, how do you expect margins to trend, say, from first quarter onwards becausee your guidance is 2.5% to 2.6% on a trajectory basis, if you could.

Sir, you see in this quarter, our NIM improvement was 9 basis points. So already, we are very, very -- because our credit growth is very high at 15.30, so that places us uniquely to negotiate on pricing. So we are not entertaining low-yield advances. We are capitalizing on expanding RAM credit, and we are very, very conscious on bulk deposits, pricing of bulk deposits. So the combined effect our NIM has taken an uptick of 9 basis points on this quarter and 1 basis point cumulative. So we presume that it will hover around 2.5 to 2.60.

Very useful, sir. Just your LCR number, if you can share? That's my last question.

So LCR, LCR was 118%. It is much above the regulatory level of 100%.

Congrats on the quarter.

The next question is from the line of Jai Mundhra.

[Foreign Language].

[Foreign Language]. Sir, a couple of questions, sir. First, just a clarification, sir, on gold loan. How much is the total gold loan outstanding in retail and on -- in agri and non-agri?

Sir, my gold loan portfolio is INR 2 lakh, 45,000 crores. And out of which, agriculture is INR 1.54 lakh crores. The remaining non-agri is INR 91,000 crores.

Right. Okay. So okay, so that is good. So that has also grown, right? So last quarter, it was, I think, INR 2.2 trillion. It has now become [ INR 2.545 lakh crores, ] right? So the gold portfolio, even on a Q-o-Q basis, is growing at a decent pace. Do you see any -- sir, so going ahead, do you see that now this is a 20% of the overall loans? Would you believe the growth here to be single digit? Or do you believe it will still be in double digit, even though it moderates? Is there any thoughts there?

Sir, it will be double digit because traditionally, our number of branches are high in South India, sir. Here, people don't place on deposits. That is why we are lacking on one side, we are struggling on CASA. But on asset side, we have this advantage of gold loans. People are more comfortable going to branches availing this gold loan. So that is why we are confident that it will grow at the same pace.

All right. Okay. Sure, sir. And sir, on ECL, right, you mentioned that SMA-1 -- I mean, total SMA you have given, but if you have the number separately for 1 and 2. I think that will be useful. If you have the numbers separately for 0, 1 and 2 together.

SMA-0 is 10,961. SMA-2 is 9,732 only. SMA-1 is INR 13,035. So the total is INR 33, 728.

Okay. So SMA-0, 10,000. SMA-1 also around INR 11,000 and the rest...

INR 13,000 -- SMA-1, INR 13,000. SMA-0 Is INR 11,000.

Right, sir. And sir, on your provisioning, right? And ECL and provisioning, I think few banks, they have said that they want to raise capital, maybe for ECL because asset quality across banks have been much stronger and there is a strong growth in regulatory capital also. Your thought process, sir, if ECL, like you mentioned, 100 basis point impact, which seems very moderate even if -- because you also have 5 years. Any thoughts on capital raise or any need for that, sir?

Sir, our profit ranges between INR 19,000 crores to INR 20,000 crores. So this will continue, I think, for the next year also. So if the need be, if need required, we will go for capital raising. And since the -- it has not moved to the Board. Once the Board permissions, then I'll share it with you. I think within a couple of months, we will share that number with you.

Okay, sure. And lastly, sir, on your NIM question, right, you mentioned a stable NIM guidance going ahead. But sir, you also raised TD rates in the month of December and January by around 30, 35 basis points, right? So how should one look at cost of term deposit or cost of deposit on a blended basis. Do you think that cost of deposit now has bottomed? And even including Q1 FY '27, this should showing -- should start inching up. Or you think that the blended cost will still decline.

Sir, we are very conscious on pricing, on bulk deposits and CD. So we work on the blended model only. And we are very conscious what is the rate of inflow and what is the rate of outgo. So that margins, we keep always in mind while quoting price. That is how our NIMs have improved in this quarter.

Sir, going ahead, do you think because we raised -- not all banks have raised term deposit rates. We did in December by around 35 basis points. So I wanted to check, sir, has the cost of deposit bottomed out? Or you think because select maturity only have raised interest rate, but you may still gain on bulk or otherwise. So how to look at the incremental -- sorry, the blended cost of deposit?

Sir, why we had raised, because our retail term deposit even after raising was much cheaper than the bulk deposit rate. And the idea behind to have a more flow in retail term deposit rather than bulk deposit. And that is what exactly has happened in the fourth quarter, which benefited us. And our cost of deposit has substantially came down if used. That is why we -- you can see the fantastic impact on net interest income of INR 549 crores. You can compare with peer banks. Ours is much better.

Correct, no, no, sir. Absolutely, it is much better. And sir, I just wanted to check 2 things since you mentioned peer banks. If you have the number of corporate loans or the overall loans, which are linked to [ tables, ] that is one. And sir, we have TWO recovery of around INR 6,500 crores this quarter -- this year as a full year. If you have any number, which goes to NII line item out of this NPA recovery because that may or may not grow as much as the loan growth, right, because of the TWO recovery. So 3 things. One, TWO recovery outlook. Number two, TWO recovery that goes to NII line item and see that [indiscernible] link corporate loans.

So sir, the -- in TWO, your interest income on your TWO advances. So it ranges about INR 350 crores to INR 400 crores, almost it contributes to every quarter. This interest income is contributed, and we are confident going ahead, it will continue, sir. And TWO recovery also, it hovers around INR 1,500 crores to INR 1,600 crores in a quarter. That may vary because of 1 big ticket resolution. If you see for the financial year '25, it was INR 6,800 crores. And this year, it is INR 6,500 crores, almost at same level. So it will continue. This will also continue.

Sure, sure. All right, sir. And the [indiscernible] number if you have.

Jai, we request you to come back to the queue for the remaining questions. The next question is from the line of Mahrukh Adajania.

So I had a question. If your cost of funding, you're confident about your cost of funds and the balance sheet is in a good shape. Then why is your loan growth guidance not as good as other banks because other banks are giving a much higher guidance? What is the constraint here?

There is no constraint. We see that GDP projection is at 6.9%. So accordingly, we project. And so, we see last -- historically, what we have given the guidance although we have surpassed these numbers. And also, we are confident that we will surpass it again. So the basis has been this only. The GDP growth projection and the past historically, how much guidance we have given in the last 3 years. That forms the basis of giving the guidance.

Okay, sir. Got it. And sir, coming back to ECL, would you -- is there any way to find out what will be the run rate impact. So on an ongoing basis every year, how much will ECL add to the credit cost?

So that, we have not worked it out because it is a forward-looking provision. So that probability of default of any loan for the next year. So we have roped in our knowledge partner, EY, and the system level implementation will take place in September. Roughly, we have calculated that the impact will be about INR 10,000 crores. And looking at our profits, we can absorb in one go, but there is a provision that we can absorb in 4 years. So bank is very, very comfortable on ECL front.

The next question is from the line of [indiscernible].

Two, three questions. First, on the gold loan, while you highlighted that the retail gold loan is growing, it seems like your agri gold loan is not growing for the last 2, 3, 4 quarters almost. Last quarter, it was INR 1.5 lakh crores. It seems like this quarter is also INR 1.5 lakh crores. And the beginning of the year, I think it was INR 1.4 lakh crores. Any challenges there, sir? Or it has to do anything with the RBI revised guidelines or something like that?

My colleague, Bhavendra ji, will answer this.

No, no. Actually, our figure is INR 2.4 lakh crore. And it's not that we have not been growing in the last 2 or 3 quarters. So with the aftermath of RBI direction, so we have changed certain -- there's no restricted customers, how they can engage with the branches with the income numbers. So because of that, little slowness is there, but not that we have consciously taken anything in that direction to stop. So nothing is there because our retail portfolio is growing as it was growing earlier. So from April 1st.

My question is on the agri gold loan only. Last quarter, it was INR 1.5 lakh crores. And in the beginning of the year, it was INR 1.4 lakh crores.

Shall I say, if you see that whatever loss you are seeing in agri is compensated in retail. It is a deliberate attempt from the bank. If you see in other than rural that is semi urban and urban, we are...

In rural also, we are growing at [ 14. ] That is there.

That in these areas, we are giving only retail. So if you see overall, you have to read both put together. You are seeing in one side, agriculture is showing us lower growth. But retail is taking up [indiscernible], it is both combined, the growth remains constant. So you should not get it in isolation. You should look at combined portfolio in compliance with RBI guidelines. This is mostly in compliance with RBI guidelines. We have devised this.

And the gold loan portfolio is growing at 33%, 34%, of which the agri gold portfolio is growing at around 15%. And we have to comply with all RBI guidelines also. So I presume that it will go in the same manner.

Sure, sir. I will probably reach out separately for any further clarification. Sir, two last questions, one on the current account. I think the growth has been [indiscernible] negative number. Any reason for that?

There were 4 accounts which were having big, big ticket 4 accounts. So I cannot name that. So that is causing the variation in current account. Apart from that, current account is growing at a healthy pace.

Sure. And sir, last question, if you can give your Stage 1, 2 and 3 provisions, as part of the IRAC norm, whatever you are holding currently in absolute terms, roughly, rough ballpark will do.

So ECL, you are talking about ECL provision?

Right. No, I think you said in the opening commentary, Stage 1, you are adequately provided. Stage 2 is where you need some buffer provision. And Stage 3 also, you are adequately provided. So I just wanted to check the absolute number if it is readily available. Else, I can reach out separately.

Absolute number can be shared only after the implementation of system. That, I can share only after the implementation. Roughly, we have worked around INR 10,000 crores, and we are making a profit of INR 19,000 to INR 20,000 crores. And this also can be staggered for 4 years. So easily, we can absorb entire in the first go itself.

Sure, sir. Okay. What is your total standard provision number?

My standard provision numbers? INR 4,500. And apart from that, there are 3 big ticket accounts, which are in SMA, where there is no need for provision, but we have made -- as a prudent banker, we have made a provision of INR 1,890 crores in that.

The next question is from the line of Gaurav Kochar.

So I have a couple of questions, sir. First is on the PSLC. Sir, if I look at the -- I'm just looking at the small and marginal farmer because I'm assuming that large part of our PSLC come from selling PSLC of small and marginal farmers. So if I look at, let's say, this year, the excess that we have is about 2.5%. So we did about 12.5% versus 10%, which is required. If I look at the same number last year and last 2 last year, that number was much higher at 3.4% and 6%. So is it fair to assume that the surplus that you carry this year is slightly lower than what you had last year?

No, no, no. We have worked it out, and this will be at the same level this year also.

Okay. Okay. So the PSLC income, you expect to be similar as last year?

[ INR 6,500 ] crores yearly.

INR 6,500. Okay. Got it. INR 6,500, sir, I think INR 2,600 crore was the number this year.

It is INR 3,000. It will be around INR 3,000.