Broker’s call: Canara Bank (Long)
Advances grew 5% q-o-q, aided by healthy retail (+36% y-o-y/+7% q-o-q) and MSME (+15% y-o-y/+7% q-o-q) growth, while corporate advances grew 4% q-o-q
Canara Bank reported stable net interest income (NII) and net interest margin (NIM) of 2.52% in its latest quarter, within the expected range. The 22 basis points quarter-over-quarter (q-o-q) CoF benefit was largely passed on to borrowers, resulting in a 29 basis points quarterly decline in yield on advances. The bank continues to shift bulk deposits towards retail CASA and term deposits.
Management anticipates 20-30 bps CoF benefits on incremental deposits, supporting NIMs in the second quarter of fiscal 2027 (FY27). The bank has set FY27 NIMs between 2.5-2.6% and aims to increase the CASA ratio to drive medium-term margin expansion. Canara Bank has mobilized $775 million in foreign currency non-resident (FCNR(B)) deposits, targeting a total mobilization of $2.5 billion.
Advances grew by 5% q-o-q, driven by strong retail (+36% y-o-y/+7% q-o-q) and MSME (+15% y-o-y/+7% q-o-q) growth, while corporate advances expanded by 4% q-o-q. Slippages have moderated to 58 basis points (vs 94 bps q-o-q), and GNPA/NNPA ratios have improved to 1.6/0.4% (vs 1.8/0.4% q-o-q). For the fiscal year 2027, the expected return on assets (RoA) is about 1%, supported by healthy provision and loan recovery income.
However, near-term NIMs may remain constrained, leading to a flattish margin outlook. The bank expects near-term NIMs to stay flat, with a focus on sustained improvement in the liability franchise and NIM expansion rather than incremental loan growth as key catalysts for earnings upgrades and valuation re-rating.
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