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Informist, Saturday, Oct. 25, 2025

By Priyasmita Dutta

NEW DELHI – State-owned Canara Bank is expected to report muted profit growth for the September quarter due to lack of support from treasury income and continued margin contraction, according to brokerages tracking the lender.

Canara bank's net profit for the September quarter is seen at INR 41.56 billion, up 3.5% on year. Sequentially, the net profit is expected to decline nearly 13%, according to estimates by four brokerages. Estimates for the net profit range between INR 40.65 billion and INR 42.55 billion.

A 3.5% on-year rise in net profit is the lowest on-year growth in bottom line since the December quarter of 2017-18 (Apr-Mar), according to data available with Informist. The state-owned lender will detail its financial results for Jul-Sept on Thursday.

"We expect (Canara) bank to report flat earnings yoy growth led by a modest decline in operating profit offset by lower provisions," Kotak Securities Ltd. said in a pre-earnings report. Canara Bank's operating profit is seen declining 3% on year to INR 74.33 billion, while provisions are seen declining 23% on year, according to Kotak Securities. The brokerage expects Canara Bank's provisions at INR 19.99 billion for the September quarter. Sequentially, however, the provisions are seen up 8.3%.

The lower provisions in the quarter are owing to the bank's asset quality being stable, brokerages said. "We do not expect any major surprise on asset quality in this quarter either," Kotak Securities said. "Asset quality likely to improve (in Jul-Sept)," Motilal Oswal Financial Services Ltd. said. The brokerage expects Canara Bank's gross non-performing asset ratio to improve to 2.6% at the end of September, 10 basis points lower than the trailing quarter and down 110 bps from the year-ago figure. The net NPA ratio is expected to be 0.6%, flat sequentially, but 40 bps lower on year, the brokerage said. 

"As the net NPL ratio (NPA ratio) is now low and similar to other PSU banks under our coverage, credit cost has the potential to decline sharply," Emkay Global Financial Services Ltd. said. It projected the credit cost will be 0.72% in the September quarter, 15 bps lower sequentially and 19 bps lower from the same quarter a year ago. Emkay also said Canara Bank's slippages are likely to normalise in Jul-Sept from the lower Apr-Jun levels. It projected the slippage ratio at 1% in the September quarter, 20 bps higher sequentially and flat on year. 

Brokerages expect the bank's net interest income to decline 3.7% on year to INR 89.74 billion. Sequentially, it is seen lower by 0.4%, estimates from four brokerages showed. "NIM (net interest margin) is expected to decline further qoq led by repricing of advances lower offset partly by a decline in cost of funds," Kotak Securities said and projected the net interest margin to be 2.10%. The brokerage also projected Canara Bank's cost of funds at 5.4% at the end of September, against 5.7% at the end of June. 

Industry-wide, banks are expected to see margin compression in the September quarter owing to the transmission of Reserve Bank of India's 100 bps of rate cuts in 2025 so far. Kotak's projection of net interest margin for the quarter is fairly lower than Emkay and Nuvama Wealth Management Ltd.'s estimate of 2.5%. 

Key developments to look out for will be the bank management's outlook on advances and deposit growth, brokerage Motilal Oswal said. A fourfold rise in treasury income had helped Canara Bank report a healthy profit for the June quarter, and beat Street estimates. 

The public sector bank had posted a net profit of INR 47.52 billion in the June quarter, up nearly 22% on year. The bank's treasury income for the quarter had totalled INR 19.93 billion, almost four times the INR 5.03 billion it had reported for the June quarter of 2024. Sequentially, however, the June quarter net profit had declined 5% due to a one-time profit in the March quarter from the reversal of provisions relating to security receipts issued by National Asset Reconstruction Co. Ltd. totalling INR 5 billion. 

Since the June quarter results, the bank's stock has risen 10% and closed at INR 125.70 on the National Stock Exchange on Friday. Of the four brokerage reports on the lender available with Informist, three have a 'buy' rating on the stock with an average target price of INR 124 per share. Only one brokerage has a 'sell' rating on the lender.

Following are the Jul-Sept earnings estimates for Canara Bank from four brokerages in descending order of the estimate of net profit in INR million:

End

Edited by Avishek Dutta

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