Canara Bank — Q4 FY25 earnings call

Call held 8 May 2025

Management summary

Canara Bank delivered a strong Q4 FY25, reporting robust growth across global business, deposits, and advances, coupled with significant improvements in asset quality. Net profit crossed ₹5,000 crores for the first time, and the bank recommended a higher dividend. While slippages saw a QoQ increase, management clarified these were largely technical. The bank is strategically reclassifying gold loans, investing in digital transformation, and expanding its branch network to drive future growth and maintain its deposit franchise.

Highlights

  • Global business grew 11.32% to ₹25.30 lakh crore, surpassing the 10% guidance.

  • Operating profit increased 12.14% YoY to ₹8,284 crores, crossing ₹8,000 crores quarterly for the first time.

  • Net profit grew 33.19% YoY, exceeding ₹5,000 crores for the first time in the bank's history.

  • Asset quality significantly improved with PCR at 92.70% (up 360 bps YoY), Gross NPA at 2.94% (down 129 bps YoY), and Net NPA at 0.70% (down 57 bps YoY).

  • Recommended a 200% dividend (₹4 per ₹2 share face value), an increase from 161% last year.

Concerns

  • Slippages increased quarter-on-quarter, primarily in MSME (₹1,250 crores), agriculture (₹750 crores), and retail (₹650 crores) segments, though management attributed a portion to technical audit classifications rather than underlying stress.

Key financials

  1. Global Business ₹25.30L Cr +11.3%YoY
  2. Global Deposit ₹14.56L Cr +11%YoY
  3. Global Advances ₹10.73L Cr +11.7%YoY
  4. Operating Profit ₹8,284 Cr +12.1%YoY
  5. Net Profit ₹5,002 Cr +33.2%YoY
  6. PCR 92.7%
  7. Gross NPA 2.9%
  8. Net NPA 0.7%
  9. Earning per Share ₹18.77 +17%YoY
  10. Fee-based Income ₹2,335 Cr +20.3%YoY
  11. Slippage Ratio 0.9%
  12. CASA Ratio 31.2%
  13. Retail Credit ₹2.23L Cr +42.8%YoY
  14. Housing Loan ₹1.06L Cr +13.6%YoY
  15. Vehicle Loan ₹20,637 Cr +20%YoY
  16. Retail Gold Loan ₹48,000 Cr
  17. Agri Gold Loan ₹1.30L Cr
  18. Personal Loan Book ₹18,000 Cr
  19. Credit Card Outstanding ₹1,100 Cr
  20. Personal Loan NPA Ratio 0.49%
  21. LCR 139%
  22. CET1 12%

What they filed

Q1 FY27: revenue up 4.5%, net profit up 60.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue30,182 30,751 31,496 31,523 32,072 +6%30,938 +1%31,839 +1%32,957 +5%
Net profit4,227 4,256 5,111 3,233 4,896 +16%5,174 +22%4,575 −10%5,182 +60%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Dividend ₹4/share (final)
    our board has recommended for a dividend of 200% with a paid-up capital as against the last year 161%. That is a 4 rupee for every 2 rupee share face value of that.
  • Liquidity Liquidity disclosed CET1 ratio is 12.03% and Liquidity Coverage Ratio (LCR) is approximately 139-140%.
    So you want to find out what is the strength of the bank without this non-core income and I am sure you must have seen and glad to know that even without this non-core income, our CET1 today is 12.03 which is a formidable strength for this bank. See, average LCR is almost 139-140% is there.

Guidance & targets

Credit Growth

  • Overall Advances Growth Credit Growth · FY26 · High confidence 10-11%
    In this advances growth, already we have given a guidance of 10 to 11 %.

    — Mr. Satyanarayana Raju

Profitability

  • Return on Average Assets (RoA) Profitability · FY26 · High confidence 1.05%
    Our return on average assets also, we have given a guidance of 1.05.

    — Mr. Satyanarayana Raju

Asset Quality

  • Provision Coverage Ratio (PCR) Asset Quality · Ongoing · High confidence above 95%
    our target is our PCR should be above 95%. So that any shocks, anything is, we will be easily absorbing that. It's a complete, it will be ensured. That is the purpose actually, we want to ensure that our PCR should touch either 95% or cross the 95%.

    — Mr. Satyanarayana Raju

Treasury

  • Trading Gains Treasury · FY25-26 · Medium confidence around 4000 crore
    You see last March it was around 3610, we can have an estimate of somewhere around 4000 crore for these type of trading gains. FY25-26 we are estimating that, of course it depends on many factors as you are all aware. So, our conservative estimate is that only.

    — Mr. Debashish Mukherjee

Digital Spend

  • Digital Spend Digital Spend · Current year · High confidence around 800 crores
    Sir, around 800 crores.

    — Mr. Satyanarayana Raju

Deposit Growth

  • CASA Ratio Deposit Growth · Ongoing · High confidence above 30%
    Actually we are able to maintain the above 30% with all our initiatives whether it is a products or processes we are the first bank we introduced N number of targeting the, aiming the life cycle of individual we have created a new products.

    — Mr. Satyanarayana Raju

Retail Credit

  • Retail Gold Loan Book Retail Credit · by FY26 end · Medium confidence up to 70,000 crores

    Previously 48,000 crores → up to 70,000 crores

    Yeah. Sir, I was saying that this 48,000 crore can move up to 70,000 crores by FY26 end. Is that the range, broad range? We can expect that, that is in the retail per se.

    — Mr. Satyanarayana Raju

What to watch in Q1 FY26

Savings Account Interest Rate Adjustment

next quarter
Current 2.90%
Target Potential reduction to match peers (2.7-2.75%)

Why it matters

A reduction in savings account interest rates would directly impact the bank's cost of funds and Net Interest Margin (NIM), which is crucial for profitability.

See, the decision we are yet to take, we are not focused on that. Actually, our rate of interest at 2.90 at this moment. So, we have a cushion to reduce up to match with that other bank at 20 basis points. We are yet to take a call on that because we are not focused. Once this results and all is over, the ALCO committee, next ALCO committee the discussion will happen and we will take a call on that.

Risks & concerns

  • Potential reduction in PSLC quantum due to RBI regulations and reclassification of gold loans

    medium

    RBI regulations and reclassification of gold loans may reduce the availability of priority sector loans in the market, potentially decreasing the quantum of PSLCs sold, though management expects higher commission rates to compensate for income.

    Management acknowledged

Q&A highlights

6 direct
Impact of provision reversals on profit and PCR Direct
500 crore has gone into what you see as part of the profit. Another 600 crore, we have made a provision as Sir explained for non-performing assets, just to improve our provision coverage ratio... our CET1 today is 12.03 which is a formidable strength for this bank.

Clarifies how one-time gains from provision reversals were utilized to strengthen the balance sheet (PCR, CET1) rather than solely boosting reported profit, indicating prudent financial management.

Asked by Mr. Ashok Ajmera

Sustainability of PSLC commission income Direct
The available commission will be less. That we will get, last year the first quarter we used to get 1.75 to only 1.8 or 1.9. But that tendency has reversed at the end of the quarter. For one quarter we got almost 2% commission. Generally that is against 0.4, 0.5%. And the first quarter, this quarter I have seen rates are already touching 3%.

Explains the dynamics of PSLC income, suggesting that while the quantum of sales might decrease, higher commission rates could sustain income, making it a recurring, albeit volatile, revenue stream.

Asked by Mr. Ashok Ajmera

Nature of increased slippages in Q4 FY25 Partial
March always compare with the previous March, not sequentially... actual slippages were 2,200. Then during the branch audit and all some 400 crores have been added. That's why it has come to 2,700 crores. Mostly it has happened only in the MSME sector.

Addresses concerns about rising slippages, attributing a portion to technical audit classifications and emphasizing YoY comparison for the March quarter, suggesting less underlying stress than QoQ numbers might imply.

Asked by Mr. Kunal Shah

Reclassification of Agri Gold Loans and impact on PSL Direct
The gold loan portfolio has increased, grown almost near to the 20 per cent. We have grown from 153 to 181, 181,000 crores. So the overall growth has not come down, but it is a little bit shifting from agriculture purposes to the RAM credit, the retail credit.

Clarifies the strategic shift in gold loan classification from agriculture to retail, driven by regulatory changes, and how the bank is managing to maintain overall gold loan growth despite this reclassification.

Asked by Mr. Vedant Engineer

Savings account interest rate strategy Partial
See, the decision we are yet to take, we are not focused on that. Actually, our rate of interest at 2.90 at this moment. So, we have a cushion to reduce up to match with that other bank at 20 basis points. We are yet to take a call on that because we are not focused.

Indicates potential for savings account rate cuts to align with peers, which could impact the cost of funds, but management is yet to make a definitive decision, creating a watch item for future NIM.

Asked by Mr. Bhavik

Rationale for continued high provisioning despite improved PCR Direct
The reason is still we are at 92. No, no, still our PCR is at 92.70. Last time also, several times I shared with you that our target is our PCR should be above 95%. So that any shocks, anything is, we will be easily absorbing that.

Explains the bank's proactive strategy to further strengthen its PCR beyond current levels to over 95%, ensuring resilience against future shocks, even if it means higher credit costs in the short term.

Asked by Mr. Bhavik

Outlook on treasury gains for FY25-26 Direct
FY25-26 we are estimating that, of course it depends on many factors as you are all aware. So, our conservative estimate is that only [4000 crore].

Provides a forward-looking estimate for treasury gains, a significant component of non-interest income, which is crucial for overall profitability, especially in a changing interest rate environment.

Asked by Mr. Ashok Ajmera

Digital spend for the current year Direct
Sir, around 800 crores.

Quantifies the bank's investment in digital transformation, highlighting its commitment to technology-driven growth and efficiency, which is a key strategic pillar for future competitiveness.

Asked by Mr. Sushil Choksey

3 min read 7 chapters

Detailed narrative

Strong Business Growth and Profitability

Canara Bank reported robust performance in Q4 FY25, with global business growing by 11.32% to ₹25.30 lakh crore, surpassing its 10% guidance. Global deposits increased by 11.01% to ₹14.56 lakh crore, and global advances grew by 11.74% to ₹10.73 lakh crore. Operating profit rose 12.14% year-on-year to ₹8,284 crores, marking the first time quarterly operating profit exceeded ₹8,000 crores. Net profit also crossed ₹5,000 crores for the first time, achieving a 33.19% year-on-year growth rate.

Significant Asset Quality Improvement

The bank demonstrated substantial improvement in asset quality, with the Provision Coverage Ratio (PCR) increasing by 360 basis points year-on-year to 92.70%, the highest in the bank's history. Gross Non-Performing Assets (NPA) reduced by 129 basis points to 2.94% (against a guidance of 3.5%), and Net NPA declined by 57 basis points to 0.70% (against a guidance of 1.10%). The slippage ratio also improved to 0.90% from 0.96% in the previous quarter, well below the 1.10% guidance.

Strategic Gold Loan Reclassification

Canara Bank has strategically reclassified a portion of its agriculture gold loans to retail credit, particularly in metropolitan areas, in response to RBI regulations. While agriculture gold loans decreased from ₹153,000-154,000 crores to ₹130,000 crores, the overall gold loan portfolio grew by almost 20% from ₹153,000 crores to ₹181,000 crores, with retail gold loans now standing at ₹48,000 crores (up from ₹1,000-2,000 crores last year). This shift is expected to continue, with retail gold loans potentially reaching ₹70,000 crores by FY26 end, contributing positively to yields.

Capital Strengthening and Dividend Payout

The bank utilized benefits from SR reversals and other gains to strengthen its balance sheet, increasing its PCR to 92.70% and maintaining a robust CET1 ratio of 12.03%. For the first time, the bank declared a 200% dividend (₹4 per ₹2 face value share), a significant increase from 161% last year, reflecting strong financial performance and confidence. The management aims to further increase PCR to above 95% to absorb any future shocks.

PSLC Income and Treasury Outlook

PSLC commission income for the full year was ₹1,546 crores, with ₹130 crores in Q4. Management anticipates that while the quantum of PSLC sales might decrease due to regulatory changes, higher commission rates (currently touching 3% in Q1 FY26, up from 1.75-1.9% last year) will help maintain income. The bank conservatively estimates treasury gains of approximately ₹4,000 crores for FY25-26, contributing significantly to non-interest income.

Digital Transformation and Branch Expansion

Canara Bank plans to spend around ₹800 crores on digital initiatives in the current year, leveraging data analytics and machine learning to identify CASA potential. The bank is also expanding its physical presence by opening 750 new branches (250 this year), strategically located based on market trends and potential, to support CASA growth and overall business expansion.

Deposit Franchise and Cost of Funds

The bank's CASA ratio stood at 31.17% in March 2025, a slight decline from 32.29% in March 2024, but management emphasized maintaining it above 30% through various initiatives and new products. The cost of deposits and funds was well-managed, with only a 4 basis point increase in cost of deposits and 3 basis points in cost of funds for the entire year. The bank is considering adjusting savings account rates to align with peers, which could further optimize the cost of funds.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Financial Services earnings calls