Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canara Bank (BOM:532483, Financial) reported a 50 basis points reduction in return on equity, indicating improved efficiency.
- The RAM sector, which constitutes 15% of the total credit portfolio, grew by 1.26%, showing strong sectoral performance.
- The bank's lending has grown by 3.5% in Russia, indicating international expansion.
- The share price increased by 1.19% during the quarter, reflecting positive market sentiment.
- The bank maintained a strong credit cost at 14.0%, indicating effective risk management.
Negative Points
- There was a dip in the margin, which is closer to the lower end of the guided range of 2.9 to 3.0.
- Slippages remained consistently around INR3,000 crores, indicating ongoing asset quality issues.
- The cost of funding went up slightly, impacting overall profitability.
- The outstanding restructured book remains a concern, with significant provisions required.
- The bank faces challenges in maintaining consistent non-interest income, which has shown volatility.
Q & A Highlights
Highlights of Canara Bank (BOM:532483) Q1 2025 Earnings Call
Q: What is driving the sequential growth in the retail book?
A: K. Raju, CEO: The growth is primarily driven by the agricultural sector and rail impairments. Additionally, the bank has been focusing on new visual merchandising projects and leveraging high-interest environments to drive growth.
Q: What is the full-year guidance on margins?
A: K. Raju, CEO: The margins are expected to stabilize by the end of the year, with a slight improvement anticipated as the bank addresses various factors, including temporary supply chain issues and legal matters.
Q: What is the outstanding restructured book?
A: K. Raju, CEO: The outstanding restructured book includes nine restaurants in Belgium, Greece, and D&O, with a total of 91 million names. The bank is managing these through various risk programs.
Q: Is there any change in the investment strategy?
A: K. Raju, CEO: The bank is focusing on reclassification and leveraging opportunities in the market. There is no significant shift in the investment strategy, but the bank is prepared to adapt to market conditions.
Q: What are the yields in the retail book?
A: K. Raju, CEO: The yields have been stable for the past nine months. The bank continues to focus on maintaining a high level of interest from customers and leveraging new loan disbursements.
Q: What is the impact of the new regulations on the loan book?
A: K. Raju, CEO: The new regulations have caused some contraction in the loan book, but the bank expects organic growth to resume in the coming quarters. The bank is also focusing on advancing its brand and leveraging opportunities in the market.
Q: What is the guidance for advances and ROA for FY 25?
A: K. Raju, CEO: The bank is on track to achieve a 10% growth in advances and an ROA of 1.1%. The bank is confident in maintaining these targets and expects slight improvements in the coming quarters.
Q: What is the impact of the new accounting rules on NPL provisions?
A: K. Raju, CEO: The new accounting rules may allow for reclassification of NPL provisions into standard asset provisions. However, the bank is still awaiting full guidelines and expects to maintain a comfortable capital position.
Q: What is the source of the large jump in other interest income?
A: K. Raju, CEO: The increase in other interest income is due to surplus SLR and liquidity management. The bank has been leveraging its liquidity to generate additional income.
Q: What is the impact of government deposits on savings bank deposits?
A: K. Raju, CEO: Government deposits account for a significant portion of savings bank deposits. The bank is focusing on managing fluctuations and ensuring a stable deposit base.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
