Earnings Outlook
Lower provisioning may push Canara Bk profits up 12% on yr
This story was originally published at 17:58 IST on 29 April 2025
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By Priyasmita Dutta
NEW DELHI – State-owned Canara Bank is expected to report a profit of over 12% on year during Jan-Mar, driven by lower provisions, which helped offset the impact of subdued net interest income and slower business growth. According to estimates from five brokerages, the bank's net profit for the quarter is seen at INR 42.22 billion, up only 2.9% sequentially. Estimates for the net profit were in the range of INR 39.48 billion and INR 45.72 billion.
According to Kotak Institutional Equities, Canara Bank's provisions are expected to decline 22% on year, with some benefit seen from reversal of security receipts-related provisions. The brokerage projected provisions for bad loans in Jan-Mar at INR 19.25 billion, as against INR 19.82 billion in the December quarter and INR 22.80 billion in in March quarter last year.
Canara Bank is scheduled to announce its financial results for Jan-Mar and 2024-25 (Apr-Mar) on May 8. On Tuesday, the bank's shares closed at INR 99.33, almost flat from the previous close on the National Stock Exchange. For Oct-Dec, the bank's bottom line stood at INR 41.04 billion due to a similar case of lower provisioning during the quarter. The provisions for bad assets was down 5.9% on year in the December quarter.
Though brokerages agreed that provisioning will be lower in Jan-Mar, there is some divergence in their asset quality outlook. Equirus Securities Pvt. Ltd. expects the asset quality to remain stable, whereas Emkay Global Financial Services Ltd. sees it inching up sequentially due to non-performing assets in the agriculture sector. Kotak sided with Equirus and said that it does not expect any major surprise on asset quality during the quarter. Meanwhile, Motilal Oswal Financial Services Ltd. expects asset quality likely to improve.
Dolat Capital Market Pvt Ltd. projected the net non-performing asset ratio at 0.9% at the end of March and the gross non-performing asset ratio to be 3.3%, whereas Motilal Oswal projected the same to be 0.8% and 3.2%, respectively. As at the end of December, Canara Bank's gross non-performing assets ratio declined to 3.34% from 3.73% a quarter ago and 4.39% a year ago while net NPAs were down at 0.89% from 0.99% at the end of September and 1.32% at the end of December 2023. The bank's guidance for the gross and net NPA ratios as at the end of March is 3.50% and 1.10%, respectively.
Even as the asset quality is expected to improve, the bank's net interest income is seen at INR 92.71 billion, down 3.2% on year and up 1.3% sequentially. In Oct-Dec, the bank's net interest income had fallen 2.9% on year to INR 91.49 billion.
Brokerages also had slightly divergent views on the outlook of net interest margin during the quarter under focus. Dolat Capital and Emkay Global projected the net interest margin to be broadly stable, whereas Equirus Securities, Kotak Institutional Equities, and Motilal Oswal saw it declining in Jan-Mar. The management of the bank, while declaring the earnings for Jul-Sept, had said that the pressure on margins is expected to continue for one or two quarters. The net interest margin had fallen to 2.71% in Oct-Dec from 2.86% in Jul-Sept. For FY25, the management has projected it to rise to 2.90%.
The business growth of the bank is also expected to be lower than the industry average, according to Equirus Securities, and "modest" as per Motilal Oswal. Brokerages said that the key outlook from the management to look out for would be comments on asset quality and trends in business growth.
Following are the Jan-Mar earnings estimates for Canara Bank based on reports from five brokerage firms in descending order of the estimate of net profit:
Brokerages: | Net interest income (INR million) | Net profit (INR million) |
Equirus Securities Pvt Ltd | 92,666.00 | 45,723.00 |
Dolat Capital Market Pvt Ltd | 92,858.00 | 42,467.00 |
Emkay Global Financial Services Ltd | 93,681.00 | 41,834.00 |
Motilal Oswal Financial Services Ltd | 94,253.00 | 41,618.00 |
Kotak Institutional Equities | 90,077.00 | 39,480.00 |
Average: | 92,707.00 | 42,224.40 |
End
Edited by Subhojit Sarkar
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