Margins are lower than peers and there's still possibility of further rate cuts. What steps would be taken to bring NIMs in line with peers? Is there a growth-margin trade-off and a floor below which you won't let margins fall? What is the absolute level of NIM you'd be comfortable with?
NIM contracted only 2 bps this quarter - yield on advances down 6 bps (49% of advances are Repo-linked, transition was immediate after the 25 bps repo cut on 5th) while cost of deposits fell 4 bps. Strategy is to capitalise on RAM momentum: RAM growth 18.70% with Retail at 31.37%, MSME at 13.74%, yields of 8.88% on RAM, 9.28% on MSME, 8.88% on Retail. On CASA - savings growing at 8.51%, individual savings over 10%, current account +14.92% (Q-o-Q dip only because of one 26,000 crore current-account transaction in previous quarter); overall CASA growing at 9.32%. We will retain margin and expect NIM in the range of 2.45 to 2.50 even if further repo reductions happen.
Should we build in a similar quantum of PSLC income for next year if conditions remain the same?
From a PSLC perspective, we don't see much difference, unless the banks which purchase from us start changing their portfolios. As of now, at least next year there should not be any effect. Going forward we can't say. Canara Bank has the advantage of being a surplus PSLC player.
You have raised deposit rates by 35 bps in January. Should we expect that to flow into cost of funds by Q4 or Q1, and therefore the decline in cost of funds won't be as much as we are anticipating?
Almost 15% of term deposits are now replaceable. We see a steep decline in whatever rates were raised last year - those are getting replaced and we are getting some 70-77 bps lower in the new deposits.
Any analysis done on post-COVID underwriting standards - how much was sanctioned/disbursed in last 5 years and NPA ratio from that vintage?
Already our underwriting standards have improved and slippage ratio is industry best at 0.64% - reflection of good underwriting standards. SMA has drastically come down from 4.16% to below 3%. So underwriting has played a very important role.
Any room to cut term deposit rates or hike loan pricing (e.g. on housing) to boost margins?
We are continuously studying the market and our term deposit pricing is according to prevailing market conditions. Home loan pricing is Repo-linked and per prevailing market conditions.
Strong growth in Retail at 31% YoY and Vehicle at 26% - which are the top one or two products outside vehicles that are growing? What is the average yield on vehicle book and other fast-growing products ex-housing? Retail yield stated as 8.83%.
In Retail our yield is 8.79% (covers total Retail portfolio - housing, vehicle, other Retail products). RAM sector yield is 8.88%. (Majumdar: vehicle book yield should be above 8.5%, around 8.5%. Outside vehicle and housing, gold loan portfolio of around 70,000-75,000 crores is growing at jet speed, more than 30%, with yield around 8.8% to a little below 9%.) Confident this 8.79% holding up and expanding next year - portfolio will grow at this speed.
What is our digital spend given the focus on RAM and enhancing business? And the cost for human resource for enabling technology and new initiatives?
Staff cost is stabilising at 4,900 crores. Efforts are taken to continuously upskill staff - last year the entire staff underwent training per their KRAs. We have a definite expenditure on this.
What would be the broad ongoing-basis impact of ECL (not one-time transition)? If ECL were implemented today, what would credit cost have been?
ECL is to be implemented from 1st April 2027. Last year's profit was 17,000 crores; this year's profit will be in the 17,000-20,000 crores range. Stage 1 and Stage 3 don't have material impact (similar to IRAC). Stage 2 will need additional ~2,500 crores (provisioning increases from 0.4% to 5%); non-fund limits another ~2,500 crores; default-rate Stage-1 additional ~5,000 crores. Total ~10,000 crores, amortised over 4 years means ~2,000-2,500 crores per year - very absorbable given profit trajectory, and CET-1 is very strong. On run-rate basis, slippage ratio 0.64% is industry best and SMA has come down from 43,000 crores to 35,604 crores (4.18% to below 3%), so very comfortable to absorb.
How much deposits are left to reprice in terms of term deposit repricing?
Only 15% of retail term deposits are left for repricing. Year-on-year, there is a 77 bps dip in the cost of new deposits.
PSLC fees are pretty low this quarter compared to last quarter. Is it seasonality, strategic, or has some PSL declassification happened due to an RBI action?
Historically PSLC was a Q1-only product (1,200-1,300 crores). This year we earned ~1,240 crores in Q1, ~900 crores in Q2 and 140 crores in Q3 - where there was no chance for PSLC. We will earn a substantial amount in Q4 also. The regulatory environment is helping us by creating a renewed avenue of sustainable quarter-on-quarter earnings, unlike previous years where PSLC was concentrated in Q1 only. It's now a sustainable income across three quarters. (Ahluwalia added: total priority sector against 40% norm is 45.25%, so there's still space for offloading PSLC in Q4.)
What explains the quarter-on-quarter jump in other OpEx? Any specific line item with surge?
Two one-time items: IPO charges for Canara Robeco and Canara HSBC of around 80 crores (absorbed by the promoter). Another 80 crores is depreciation for the employee furniture scheme - we have reduced the replacement cycle from 10 years to 5 years to bring it at par with industry, requiring additional one-time depreciation. Plus another 100 crores on technology-related AMC charges and ongoing CapEx. So roughly 250 crores is additional non-routine in nature.
Should margins bottom out if there's no further rate cut, or should we still see some contraction going forward?
With OMO operations and the buy-sell swap being announced, liquidity will be injected and we see the cost of deposits cooling further. So yes, if the rate cut doesn't happen, margins will stabilise.
Out of the total recoveries from the written-off account, how much went to the interest income line item?
About 370 crores went to interest income.
Can you bifurcate SMA-0, 1, 2 separately out of the 35,000 crore number? Have you started providing anything on SMA-1 and 2 for ECL transition?
Total SMA in absolute terms has come down from 43,000 crores to 35,604 crores. SMA-2 down from 21,268 crores to 15,454 crores. SMA-1 down from 11,882 crores to 10,593 crores. As ratios: SMA-2 from 2% to 1.30%, SMA-1 from 1.13% to 0.89%. In three accounts we have provided 1,946 crores additional as prudent bankers (outside SMA purview). (Majumdar added: SMA-1 increased due to shifting of one account - Kaleshwaram Irrigation Project.) Total SMA has come down from 4.18% to 2.99% and slippage is 0.64% - industry best.
Outside Kaleshwaram and some other large account, are we providing any rule-driven provisioning on SMA-1 and 2?
Provision coverage ratio is 94.12%. In these three accounts we have provided 1,946 crores against outstanding of 6,600 crores. Although we don't say they will slip, they continuously appear in SMA.
On gold loan - how much is Agri gold vs Retail gold loan as on December? Any change in classification between Retail and Agri gold given recent RBI observations at other banks?
Total gold loan portfolio is 2,21,000 crores: Agri gold is 1,48,000 crores and Non-Agri is 72,661 crores. Very consciously we have rolled back gold loan products in metropolitan and urban centres because that was the RBI observation - now we are totally compliant. Gold loan portfolio is improving at 30% YoY.
Strong 30%+ jump in Retail - is this a buyout thing or totally organic growth?
This is totally organic. No buyout in retail.
Credit growth target for the year was 10-11% and in nine months you have already achieved ~11%. Would you revise it upward? Similarly deposit target 9-10% but only 6.39% achieved in 9 months - is there divergence?
Net profit was made despite 293 bps PCR increase and still recorded highest net profit. On credit, guidance was 10-11% but already crossed 13.59% and we see that will be maintained. On deposits, guidance was 9-10% but already near 13% and will be maintained in Q4 also.
Treasury income almost doubled to 3,056 crores with 2,590 crores profit on sale of investment. Will treasury continue to contribute so much in Q4, or will it slow down with NII making up?
In Q3, due to listing profits of Canara Robeco (13% stake offload) and Canara HSBC (14.5% stake offload), we gained 2,006 crores. Going ahead, treasury maintenance depends on yields softening. At the moment yields are not cooling. If more OMO operations happen and buy-sell swap injects liquidity, cost of deposits comes down and yields soften, treasury will take an upturn.
On NBFC portfolio - Canara Bank has historically been less optimistic on NBFC and co-lending. Any change in stance now? What is the present exposure to NBFC sector for onward lending?
NBFC exposure is 1,51,000 crores, growing at 6.09%. We are open to NBFC lending provided rates are good. Normally AA, AAA rated NBFCs approach us but rates are not competitive, so we shy away because protection of NIM is also a major criterion. While growing more than 13.59%, we don't see reason to entertain low-yielding advances.
Recovery in written-off accounts is 2,051 crores. What is the total written-off book, and do we expect to maintain the recovery momentum?
Last 3-4 quarters consistently we have had good write-off recoveries and that will continue. Total written-off book is 66,000 crores. Conscious call to maintain more than 2,000 crore recovery range - last December 2,008 crores, this year 2,051 crores. Although total NPA book is falling, we are trying to maintain this recovery ratio.
What would be the average LCR for the quarter? It was around 150% last quarter.
Our LCR is 125%.
Borrowings increased by 55,000-57,000 crores quarter-on-quarter to 1.5 lakh from 90,000. What instruments were used and at what cost?
Borrowings increase is on two fronts. One: AT1 bonds raised this quarter, which is partly replacement of old bonds - net increase only ~600-700 crores in Tier 1. Two: refinancing from NABARD and SIDBI of existing loans at lower rates. (Ahluwalia added: SLR is 24% vs prescribed 18%, excess of 6%; we borrow whenever opportunity comes to take advantage.) Refinance cost from NABARD/SIDBI is around 5%.
Standard asset provisioning - last quarter was 300 crores, this quarter is 286 crores. Anything specific to read here?
One is DCCO extension provision of around 80-90 crores. Other than that, all routine - nothing else.
On the 2,051 crore written-off recovery - what is the mix between Retail and Corporate? Were there chunky accounts or is it Retail-granular?
Four major accounts contributed: Chenani Nursery 288 crores, Karanja Terminals 271 crores - that's the bulk. Bigger accounts will always materialise. (Majumdar added: split is around 50-50 Retail vs Corporate. Retail recovery in DWO is around 1,000 crores per quarter on average, between 900-1,000 crores.)
How much further can borrowings go up from here?
We are already at an optimum level. Borrowing is a product and we don't want to increase it - we borrow just to leverage cost and to neutralise cost with excess SLR. So borrowing will not go up much - it is at optimum level. (Ahluwalia added: take opportunities in the market.)
Bad-loan recoveries from written-off accounts and NPAs have been good for the last couple of years. What is the outlook for FY27?
It will continue - we have NCLT, DRT, SARFAESI options, Lok Adalats being regularly conducted, aggressive OTS schemes. We don't see any shortfall coming. Similar run-rate as this year is possible.
You got 2,000 crores one-off profit. Have you utilised that for contingent buffers and what is the current contingent buffer?
In three accounts we are maintaining 1,946 crores as abundant precaution. Although we don't foresee any slippage in these accounts, we have done so as prudent bankers. We are also making adequate provisions for regulatory items like DCCO extension. (Majumdar added: provision coverage is going up - we are a shade below peers and want to be in that space. In standard asset, wherever weaknesses exist, we are proactively making provisions within the regulatory framework.)
Current account balances have shown a lot of fluctuations quarter-on-quarter. What is the deposit strategy to improve the franchise since it's relatively weaker vs peers?
Current account fluctuation is due to one account - in September quarter we got 26,000 crores deposit in that account. Subtracting that, from 49,000 it has grown to 54,000 - so current account has grown 15%. Savings has grown 8.51%; within savings, individual is more than 10%. CASA is growing at 9.32%.
Despite strong Retail growth, why is margin down 5 bps sequentially while LDR has also gone up?
Margins are low because CASA is not growing to the desired level - growing at 9.32% but average CASA is 30% which is on lower side. (Majumdar added: whenever there is a policy rate cut, it must be passed on to RLLR-linked loans immediately. 49% of portfolio is RLLR-linked, whereas deposit repricing takes minimum 6 months to 1 year. That is the reason for compression and will continue till rate cut stabilises.)
Deposit growth has been kind of lagging despite CRR benefit this quarter. How do you plan to ramp it up to meet loan growth guidance?
Our deposit is growing at 12.95% against guidance of 9% to 10%. We will continue with the same performance in Q4 also.
There is a restatement in deposits for September - what has been reclassified?
RBI observation that overseas branches' deposits taken from banks were earlier considered as deposits - now reclassified as borrowings. Subsequently changed in other previous quarters too. 33,000 crores reclassification has been done - has been reduced; range is 23,000 from December '24 in subsequent quarters; in December 33,000 has been reduced.
What is the breakup of fresh slippages during the quarter?
Total slippage 1,857 crores: Agriculture 789 crores, MSME 739 crores, Retail 294 crores, Gold 35 crores. No corporate account has slipped.
Are you spending on enhancing top management and staff capability beyond regular staff expenditure - given AI and new technology/product initiatives ahead?
We are conscious of what our future workforce will look like. We have recruited data scientists, Python engineers for AI capabilities. A vertical has been created separately for AI to identify use cases - already implemented under fraud prevention and default prediction. More use cases will come. We will further enhance employee capabilities under training. Business Around product has been nominated to be adopted across industry; we have a dedicated Business Analytics team for lead generation.
What is the total annual digital spend budget and the future outlook on that?
Around 1,000 crores annually on digital initiatives. (Majumdar added: for the last three years we have been spending around 800-1,000 crores. This year we should be able to reap the benefits. AMC charges will go up. AI-related, we have established a department needing both people-side and technology-side investment going forward.)
Three other listed companies are under our fold - cross-selling benefits and how many products are we selling to existing customers?
From Canara Robeco, Canara HSBC and Can Fin Homes we are getting substantial benefit. In the previous insurance NFO, against target of 500 we reaped 6,050 crores in 15 days. We are enhancing value for customers by cross-selling Canara Robeco SIPs, mutual funds, insurance through 10,066 branches. We earn close to 500 crores income from subsidiaries by selling their products. Apart from car loan and housing loan, we are also selling credit cards, Demat accounts and other products. (Ahluwalia added: Business Analytics wing creates leads with machine learning models that scrub data and suggest how many products can be sold to a customer - conversion rate is very high, RAM credit growth of 13.5% reflects this.)
Market is favoring PSU banks. We may not need equity for nominal growth, but in the past we did QIPs ahead of time. Any QIP plans this quarter or coming time?
QIP is not now lined up. (Majumdar added: capital adequacy already at 16.5%; adding 17,000-20,000 crores profit per annum. Adequately capitalised for double-digit growth in next couple of years. If at any moment it is required, I don't see a challenge raising it - but in immediate future bank will not require it.) Self-reliance is the growth-engine summation.
Top five areas of growth in advances for next year and yields on those advances?
RAM sector is the strength growing at 18.70% with yield 8.88%. MSME growing 13.74% with yield 9.28%. Gold growing 30% with yield around 9%. Apart from that, income from PSLCs from surplus priority sector. These are strength areas plus the return of recoveries - we will continue this.
NIM range stated at 2.45-2.50%. Any scope for improvement over the next one to two years to a 2.6-2.7% range?
Definitely yes - that will happen as the rate cycle effect settles down. There is always a time lag in passing on RLLR-based loans vs deposit repricing. Once that stabilises, automatically 15-20 basis points will immediately rise across lenders. We should be no exception - it should be more, in fact.
Are you doing any ECL provisions in these quarters, or are you doing it just in one go (as peer banks like PNB have done)? What is the total ECL provision quantum from 1st April 2027?
As MD said, total ECL number will be less than 5-digit. We have one more year for implementation; we will add minimum 17,000-20,000 crores profit per year and PCR will be all-time high above 95%. So by implementation time, ECL requirement will come down further from that 5-digit figure to a much lower number. Even if implemented in one go, CRAR will be above 15 and CET-1 above 11 (impact of only a percentage point). RBI has allowed spread over 4 years - almost no effect. CRR cut release of funds during September and November has cushioned all that. We don't need pre-emptive provisioning - quarterly profits will be sufficient at any point in time to absorb ECL without hindering business growth and capital position.