After reporting strong Q1 performance with a 21.7 per cent y-o-y jump in net profit at ₹4,752 crore, Canara Bank is optimistic about exceeding its FY26 credit growth guidance. In a conversation with businessline, Managing Director and CEO, K Satyanarayana Raju, said the bank expects credit growth to stay above 12 per cent in the coming quarters. He also addressed margin pressures, the sustainability of Treasury gains, CASA strategy, and NPA outlook. Edited excerpts:
Net interest income contracted 1.7 per cent y-o-y and NIM 2.55 per cent below the FY26 guidance range. What are some of the margin pressures, and do you expect recovery in the second half of the fiscal?
The pressure on margins is largely due to deposit repricing lag. If there are no further rate cuts, we expect margin improvement to start in the second half of the year. But if there is another rate cut, it benefits borrowers almost immediately within a week. However, the cost adjustment on the deposit side takes longer, around six to nine months, because most term deposits have a one-year maturity. This mismatch impacts our NIM in the short term.
Non-interest income grew significantly at 33 per cent led by Treasury gains. How sustainable is this stream, and do you anticipate continued reliance on treasury gains going forward?
The ₹1,900 crore non-interest income includes a one-time Treasury gain of about ₹500 crore from the RBI’s Open Market Operations (OMO) in June. We booked gains from our AFS portfolio as bond yields fell. This kind of gain is seasonal and market-driven, so it won’t occur every quarter. That said, we consistently earn ₹1,000 crore to ₹1,100 crore from Treasury each quarter.
To counterbalance fluctuations, we have also kept a buffer through excess PSL (Priority Sector Lending) certificates. We have 5-6 per cent excess exposure in priority sectors such as agriculture and small/marginal farmers that we plan to sell in the market during Q2. In addition, we have sanctioned one-time settlement (OTS) proposals worth around ₹1,200 crore, most of which are expected to be realised within this quarter, adding to non-interest income.
We are also targeting non-governmental institutions, such as educational bodies, hospitals, NGOs, housing societies, for business. We’ve developed a mobile app, Business Around, to help our branch managers identify and reach untapped customers using data analytics.
Gross and net NPAs improved to 2.69 per cent and 0.63 per cent, respectively, with PCR at 93.17 per cent. Are you seeing any stress from MSME/real estate sectors?
No significant stress is visible at this point. We’ve brought slippages down significantly, from ₹3,400 crore to ₹3,800 crore per quarter a year ago, to around ₹2,000 crore to ₹2,100 crore now. In the current quarter so far, slippages are under ₹400 crore. While some slippages are inevitable, especially in MSMEs, we have built strong internal controls. For the last eight quarters, our recoveries have exceeded slippages. With slippages under control and recoveries improving, we are seeing consistent improvement in asset quality.
You’ve already exceeded your full-year credit growth guidance of 10-11 per cent in Q1 itself, clocking 12.4 per cent growth. Do you expect this momentum to continue, and will you be revising the guidance for FY26?
We’ve always given guidance conservatively, and it’s been our consistent trend to outperform it. So, we don’t see the need to formally revise the guidance at this point. That said, I’m confident we will exceed 12 per cent credit growth for the full year.
