Canara Bank Q1 FY2024 Concall Summary

Key Takeaways

• Steady quarter, confident tone: Net profit grew on track, NIM held at 3.05%, and operating profit rose 15.11% YoY despite deposit cost pressure. Management expects the momentum to continue.
• PCR catch-up is a deliberate drag: The bank provided ₹800+ crore beyond the regulatory requirement this quarter, pushing PCR past 88%, and will keep doing so until it crosses 90%.
• Gold loans are the quiet growth engine: A ~30% YoY surge, driven by faster turnaround times through dedicated counters across 2,000+ branches, is pulling in walk-in emergency borrowers.
• PSLC income front-loaded, not structural: The June quarter's major PSLC contribution is a seasonal pattern; management expects to compensate in later quarters through interest income, recoveries and fee growth.
• What to watch next quarter: Whether the Relationship Manager rollout in 5,000 branches moves the CASA needle, the pace of the remaining 20% corporate loan repricing, and any softening in term deposit rates if liquidity improves.

Margin & Profitability Management

• NIM held at 3.05% despite the high interest rate regime stressing deposit costs, with management confident of staying above 3% for the full year.
• CD ratio cushion: The ratio sits at 73% with scope to expand to 78%, giving the bank room to grow advances without chasing deposits at any cost.
• Deposit cost peak: Existing deposits have been repriced and interest expense has reached its peak; CASA initiatives and a new recurring deposit product are expected to compensate going forward.
• Corporate loan repricing nearly done: 80% of the corporate book has repriced, with the remaining 20% tied to annual resetting cycles, so the tailwind from rising yields is largely captured.
• Operating profit stress acknowledged: The 15.11% YoY growth (versus 20% last year) reflects deposit mobilisation costs, and that stress is expected to continue in the current quarter before easing in H2 if liquidity improves.

K. Satyanarayana Raju: "3.05, we are given the guidance, but we are confident that we will maintain above 3."

Asset Quality & Provisioning

• PCR crossed 88% after the bank provided more than ₹800 crore beyond the stipulated requirement this quarter, an improvement of over 350 bps.
• The catch-up is deliberate and ongoing: Management will continue providing ₹2,400–2,500 crore per quarter until PCR crosses 90%, closing a historical gap versus peer banks.
• SMA uptick is seasonal, not alarming: SMA 01 and 02 rose in Q1 because agriculture NPAs reflect more during the sowing season (June–September) and MSME renewals bunch in the same window. Slippages at ₹3,482 crore were lower than the ₹3,940 crore in Q1 last year.
• ECL provision estimate revised sharply down: The initial rough calculation was reworked after clarifications and has come down more than 50%, now at an estimated ~2 to 2.25% effect; a consultant has been onboarded for further guidance.
• Gross and net NPA guidance: Management guided to 4.50% gross NPA and 1.20% net NPA, and expects to be below both by the end of this quarter.

K. Satyanarayana Raju: "till we reach at par with other banks, we continue to provide this additional amounts every quarter, to see that our PCR crosses 90%."

Gold Loan & Retail Asset Growth

• Gold loans grew ~30% YoY, driven by a turnaround-time strategy: 500 dedicated jewel loan branches with quality testing machines and exclusive staff, plus separate counters in 1,500–1,600 other branches.
• The TAT logic: Customers raise gold loans in emergencies, so faster processing directly converts walk-in demand; the gold-enabled branch network has doubled from ~3,000 to 6,000 branches.
• Corporate lending stays selective: The bank will continue to prioritize security, rating and pricing, with average yield on advances at 8.43%, the highest in several quarters.
• Loan growth on track: Q1 delivered 3% domestic credit growth, and management reiterated a 10.5% guided growth rate for the year, calling it a minimum.

K. Satyanarayana Raju: "a customer raises a loan against gold only in an emergency. So TAT matters for growth. That TAT we addressed by creating exclusive counters in various branches…"

Fee Income, Treasury & Other Income

• PSLC income is front-loaded by design: The major contribution in the June quarter is a pattern repeated for the last 2–3 years; Q2 will have some but not at Q1 levels, and Q3/Q4 will be very nominal.
• The offset plan: Management expects to compensate through interest income from advances (₹25,000 crore growth in Q1), higher recoveries from the ₹66,000 crore written-off book, and fee income growing 9–10% quarterly.
• FX gain collapsed on spread compression, not volume: The drop from ₹952 crore in June 2022 to ₹236 crore in June 2023 reflects US rate hikes reducing premiums; transaction volume stayed roughly constant. Premiums are expected to recover slowly from the March bottom.
• Treasury positioned for a rate turn: Rising yields are currently unfavorable, but the portfolio yield increased to 6.85% from March, and the bank is poised to make better profits when yields decrease.

CASA, Deposits & Customer Initiatives

• CASA initiatives launched on April 3rd: A first-in-India salaried class product offering term life insurance (₹1 lakh to ₹6 lakh across four tiers), plus a zero-charge non-salaried product for urban and semi-urban areas.
• Relationship Manager concept went live July 1st in 5,000 top savings bank branches covering 80% of HNI individuals, with the top 200 customers per branch assigned personal RMs and direct letters sent from head office.
• Term deposit rates held steady: Management sees no need to raise retail term deposit rates given ₹8,000 crore of incremental growth; current high rates will persist in the current quarter, with possible softening in H2 if liquidity improves.
• A new customer redressal vertical headed by a General Manager was created, a first for the bank, alongside a "one bank, one call center" (24x7, 365 days, 35 services in 12 languages).

K. Satyanarayana Raju: "No Sir, literally that is not required because our retail term deposits is growing."

Digital, Subsidiaries & Structural Moves

• Digital lending and CRM procurement are at advanced RFP stages; the bank is also #1 in CBDC onboarding and its mobile app Ai1 is the highest-rated public sector bank app on Google Play Store at 4.506.
• Subsidiary IPO process initiated for Canara HSBC and Canara Robeco, with a minimum 15–18 month timeline, expected in the second half of the next financial year.
• Credit card subsidiary planned: The division will shift to a 100% owned subsidiary via Canara Bank Financial Services, and negotiations are ongoing to purchase the remaining 31% stake in CCSL (Canara Bank Computer Services), with completion hoped for next quarter.
• IBM/Kendrell contract worth ~₹3,000 crore is almost finalized.

K. Satyanarayana Raju: "we say less, but we do more. That has been proved once again in the technology front."

Guidance & Commitments

Key Metrics