Summary
Canara Bank - Q3 FY26 Earnings Call Summary Thursday, January 29, 2026 5:00 PM
Event Participants
Executives 4 Bhavendra Kumar, Hardeep Singh Ahluwalia, S.K. Majumdar, Sunil Kumar Chugh
Analysts 12 Akshay Badlani, Anand Dama, Ankit, Ashlesh Sonje, Ashok Ajmera, Bhavik Shah, Chetan Wadia, Gaurav Jani, Jai Mundra, Jayant Kharote, Mahrukh, Param Subramanian
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Global Deposits | ₹15.21 lakh crores | +12.95% YoY; growth remains above annual guidance despite industry liquidity challenges. |
| Global Advances | ₹11.92 lakh crores | +13.59% YoY; driven by robust momentum in the RAM sector. |
| Net Profit | ₹5,155 crores | +25.61% YoY; highest-ever quarterly profit despite aggressive provisioning. |
| Operating Profit | ₹9,119 crores | +16.36% YoY; supported by strong core income and treasury gains. |
| Net Interest Margin (NIM) | 2.88% (Est. Range 2.45-2.50%) | -2 bps QoQ; contraction driven by 25 bps Repo rate cut impact on 49% of the RLLR-linked book. |
| Gross NPA (GNPA) | 2.08% | -126 bps YoY; ongoing improvement reflecting tightened underwriting standards. |
| Net NPA (NNPA) | 0.45% | -44 bps YoY; significant reduction in credit stress. |
| Provision Coverage Ratio (PCR) | 94.19% | +293 bps YoY; management aims for industry-leading coverage above 95%. |
| Cost-to-Income Ratio | 45.92% | Impacted by one-time employee benefits (₹80 cr) and IPO related costs (₹80 cr). |
| CRAR | 16.50% | Robust capital position with CET-1 at 12.37% (+40 bps YoY). |
| Slippage Ratio | 0.64% | -32 bps YoY; management claims this as “industry best” performance. |
Geographic & Segment Commentary
- RAM (Retail, Agri, MSME): This segment is the primary growth engine, reaching ₹7.04 lakh crores (+18.70% YoY). MSME grew at 13.74% with a yield of 9.28%, while Retail saw explosive growth of 31.37% led by Housing and Gold loans.
- Gold Loans: Total portfolio stands at ₹2.21 lakh crores (+30% YoY), split between Agri-gold (₹1.48 lakh crores) and Non-Agri (₹72,661 crores). The bank has recalibrated products in urban centers to comply with RBI observations.
- CASA: Total CASA growth stood at 9.32% YoY. Savings bank individual balances grew >10%, though a one-time ₹26,000 crore current account transaction in the previous quarter caused a sequential dip in CA levels.
Company-Specific & Strategic Commentary
- Digital & AI Initiatives: Annual digital spend is maintained at ₹800–1,000 crores. A dedicated AI vertical has been established, recruiting data scientists and Python engineers for fraud prevention and default prediction models.
- Monetization of Subsidiaries: The bank gained ₹2,006 crores through stake sales in Canara Robeco (13%) and Canara HSBC (14.5%). These subsidiaries also contribute ~₹500 crores in annual cross-selling income.
- Asset Quality Management: Total SMA (5cr+) declined from ₹43,917 crores to ₹35,604 crores YoY. Management proactively provided ₹1,946 crores for three specific stressed accounts as an “abundant precaution.”
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Advance Growth | 13% - 14% (FY26) | Expecting to maintain current momentum in RAM and MSME sectors. |
| Net Interest Margin | 2.45% - 2.50% | Margin outlook remains cautious due to the time lag between RLLR repricing and deposit costs. |
| Credit Cost | < 0.70% | Consistent improvement in slippages and high recovery in write-offs to keep costs low. |
| Recovery in DWO | > ₹2,000 cr / quarter | Sustainable run rate expected through NCLT, SARFAESI, and aggressive OTS schemes. |
Risks & Constraints
| Risk | Context |
|---|---|
| Interest Rate Sensitivity | 49% of advances are RLLR-linked, leading to immediate yield compression upon Repo rate cuts, while only 15% of term deposits are currently up for repricing. |
| ECL Transition | Total impact estimated at ~₹10,000 crores. Management plans to amortize this over 4 years (₹2,500 cr/year), which they believe is easily absorbable via ₹17k-20k cr annual profits. |
| Deposit Concentration | High reliance on term deposits; the bank faces a trade-off between growth and margin protection if CASA growth doesn’t accelerate. |
Q&A Highlights
Net Interest Margins
- Question: What steps are being taken to bring margins in line with peers given the traditional CASA issues? (Mahrukh)
- Answer: Strategy focuses on higher-yielding RAM sectors (8.88% yield) and MSME (9.28%). Management expects NIM to stabilize in the 2.45-2.50 range despite potential future rate cuts (Hardeep Singh Ahluwalia).
ECL Impact & Provisions
- Question: What is the ongoing run rate impact of ECL beyond the one-time transition? (Mahrukh)
- Answer: Minimal ongoing impact expected as slippage is at 0.64% and SMA is declining. Transition impact of ₹10,000 cr will be amortized over 4 years, costing ~₹2,500 cr annually (Hardeep Singh Ahluwalia/S.K. Majumdar).
PSLC Income
- Question: Was the lower PSLC fee this quarter due to seasonality or RBI action? (Anand Dama)
- Answer: It is now a sustainable quarterly earning. The bank earned ₹1,240 cr in Q1, ₹900 cr in Q2, and ₹140 cr in Q3. Current PSL stands at 45.25% against 40% norms, allowing for Q4 offloading (S.K. Majumdar/Hardeep Singh Ahluwalia).
Deposit Reclassification
- Question: Why was there a restatement in September deposits? (Gaurav Jani)
- Answer: Per RBI observation, ₹33,000 crores of deposits from overseas branches previously classified as deposits were reclassified as borrowings (Hardeep Singh Ahluwalia).
Key Takeaway
Canara Bank delivered a robust Q3 FY26, characterized by its highest-ever quarterly net profit of ₹5,155 crores, driven by a 25.6% YoY growth. Strategic focus on the RAM sector (Retail, Agri, MSME) has yielded a 13.59% advance growth, with Gold loans showing exceptional momentum at 30% YoY. While NIMs faced a slight compression of 2 bps due to the Repo rate cut affecting RLLR-linked loans, management remains confident in a 2.45-2.50 range supported by yield-rich organic growth. Asset quality is a standout, with the slippage ratio at an “industry best” 0.64% and GNPA falling to 2.08%. Despite a restatement of ₹33,000 crores in deposits to borrowings, capital adequacy remains strong at 16.5%, negating the need for near-term equity dilution. The bank is well-positioned to absorb the estimated ₹10,000 crore ECL transition through internal accruals, targeting a sustained ROA of over 1%.
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