State-owned Canara Bank on Monday reported a 12.25% year-on-year increase in its net profit to ₹4,104 crore for the quarter ended December, compared with ₹3,656 crore in the year-ago period.
Shares of the lender ended 4% lower at ₹92.91 on the NSE.
Total interest income rose 8% YoY to ₹30,312 crore, while interest expenses grew at a faster pace of 14% to ₹21,163 crore. Net interest income declined by 3% to ₹9,149 crore, primarily due to a 29% drop in other interest income, which stood at ₹1,680 crore.
Explaining the decline, managing director and CEO K Satyanarayana Raju said at the earnings press conference that the bank had earned significant other incomes in previous quarters by deploying surplus liquidity in overnight and short-term money markets. “This quarter, with credit growth in double digits, we prioritised advances over deploying surplus liquidity in the money market, resulting in a decline in other interest income.”
Gross domestic advances increased 10% YoY to ₹9.87 lakh crore in the latest quarter. Retail advances posted the highest growth, rising 35% to ₹2.08 lakh crore, while MSME advances grew 7% to ₹1.43 lakh crore. Advances to the agriculture and allied sectors remained flat at ₹2.43 lakh crore. The corporate loan book grew 8% to ₹4.53 lakh crore.
Raju said the bank is seeing healthy demand from infrastructure projects in steel, cement, manufacturing, data centers and green energy sectors.
The RAM (retail, agri, and MSME) segment accounted for 57% of global advances of ₹10.49 lakh crore as of December 2024, while corporate loans contributed to the rest.
Total domestic deposits rose 8% YoY to ₹12.57 lakh crore. However, the share of low-cost CASA (current account and savings account) deposits declined to 29% from 32% a year ago.
“Mobilising low-cost deposits remains a challenge across the industry,” Raju said. He attributed the decline to the high interest-rate environment, which is prompting customers to shift surplus funds into high-yield fixed deposits.
Canara Bank introduced two high-interest, long-term FDs in the December quarter to boost liquidity in preparation for the new liquidity coverage ratio norms expected to take effect on April 1.
The bank acknowledged higher-cost deposits would strain net interest margins (NIMs). “NIMs are under stress. Even in the December quarter, bulk deposit rates were at 8%. For the full year, we expect NIMs to settle at around 2.8%, down slightly from 2.83% at present,” Raju said.
The asset quality showed a significant improvement, with the gross non-performing assets (NPA) ratio falling to 3.34% from 4.49% a year ago, while net NPA dropped to 0.89% from 1.32%. Fresh slippages during the quarter declined to ₹2,363 crore, compared with ₹2,697 crore last year.
Total recoveries, including from written-off accounts, amounted to ₹3,178 crore.