Canara Bank Q2 FY25 results

Canara Bank’s Q2 FY25: Profit Soars and Asset Quality Improves—Is This the Next Big Banking Bet?

Canara Bank delivered solid financial results for Q2 FY25, reporting a net profit of ₹4,014 crore, marking an 11.3% increase year-over-year from ₹3,605 crore. This performance is a testament to Canara Bank’s ongoing efforts to improve asset quality and optimize lending practices across core sectors, which is steadily driving its growth.

Significant Improvement in Asset Quality

A key highlight for Canara Bank this quarter is the marked improvement in asset quality. The bank’s Gross Non-Performing Assets (GNPA) ratio declined sharply from 4.76% last year to 3.73%, while Net NPA dropped to 0.99%, a 42-basis-point reduction. The bank attributes this progress to effective risk management strategies and a disciplined approach to lending.

Strong Provision Coverage Ratio and Capital Adequacy

The Provision Coverage Ratio (PCR) for Canara Bank improved to 90.89%, up by 216 basis points, indicating a strong buffer for potential loan losses. Additionally, the bank’s Capital Adequacy Ratio (CRAR) strengthened to 16.57%, a 37-basis-point increase from last year. Tier-I capital reached 14.64%, with Common Equity Tier 1 (CET1) standing at a healthy 12.00%.

Growth in Global and Domestic Business Segments

Canara Bank’s global business saw a notable 9.42% year-on-year growth, reaching ₹23.59 lakh crore. This growth was driven by a 9.34% increase in global deposits, totaling ₹13.47 lakh crore, and a 9.53% rise in gross advances, now at ₹10.11 lakh crore.

Within the domestic market, deposits climbed 8.34% to ₹12.39 lakh crore, while domestic advances saw an 8.64% uptick to ₹9.54 lakh crore. The bank’s focus on Retail, Agriculture, and MSME (RAM) lending further bolstered credit expansion, with RAM credit rising by 11.54% year-over-year to ₹5.76 lakh crore.

Surge in Retail and Housing Loans

Retail lending emerged as a strong area of growth for Canara Bank, posting an impressive 31.27% increase and reaching ₹1.94 lakh crore. Housing loans expanded by 12.29% to ₹99,452 crore, and vehicle loans grew 15.49%, reflecting strong consumer demand in these segments.

Fee-Based Income and EPS Growth

Canara Bank also reported a robust 17.68% rise in fee-based income, totaling ₹2,436 crore. This growth in fee-based income, coupled with an increase in earnings per share (EPS) by 10.57%, underscores Canara Bank’s strong operational efficiency and revenue diversification efforts.

Slippage Ratio Improvement and Stock Performance

The slippage ratio, which tracks the rate of new non-performing assets, improved to 1.00%, down 32 basis points from last year, signifying reduced risk in the bank’s loan portfolio. Following the results, Canara Bank’s stock saw positive momentum, trading 2.63% higher at ₹103.30 per share on the Bombay Stock Exchange (BSE).

Conclusion:

Canara Bank’s Q2 FY25 results reveal a well-rounded growth story driven by strategic improvements in asset quality, a strong capital base, and expanding credit. The bank’s commitment to maintaining low slippage ratios and a high Provision Coverage Ratio reinforces investor confidence. As Canara Bank continues to strengthen its position in the market, its focus on core sectors and diversified revenue streams is positioning it well for future growth.