Canara Bank lines up two more legacy accounts for NARCL transfer, valuation talks ongoing, says Canara Bank’s Hardeep Ahluwalia

Hardeep Singh Ahluwalia

• Canara Bank may transfer 2 legacy accounts to NARCL in Q4 pending valuation talks.
• Bank's net profit up 25.61% YoY due to 13.59% credit growth and strong provisioning
• CASA deposits rose 9.32%, maintaining a stable 30% ratio with new products.

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Canara Bank has identified two additional legacy accounts for potential transfer to the National Asset Reconstruction Company Ltd (NARCL) in the fourth quarter, even as valuation discussions among lenders are still underway, said Hardeep Singh Ahluwalia, Additional Charge for the position of Managing Director and Chief Executive Officer, and Executive Director told Moneycontrol in an interview.

The bank has already transferred one account to NARCL in the current financial year and is continuing to clean up its legacy stressed assets in a calibrated manner, he added.

He said that while the two accounts have been earmarked, the final decision on transfer will depend on achieving valuation consensus with other lenders. The bank indicated that timelines will be guided by pricing comfort rather than quarter-specific targets.

Edited excerpts:

Profit growth has been strong again this quarter, with net profit up around 26%. What has driven this performance?

The profit growth has primarily been driven by robust credit growth of 13.59%. Operating profit has increased to Rs 9,119 crore, which provided sufficient buffer even after a significant 293 bps increase in provision coverage. Despite this elevated provisioning, among the highest in the industry, the bank delivered a strong net profit of Rs 5,155 crore, registering a YoY growth of 25.61%.

While advances are up in double digits YoY, quarterly growth is just about 3.5%. Has the benefit of GST rationalisation flowed through?

Our guidance was 10-11%, but we have exceeded that with 13.59% growth. On a QoQ basis, corporate advances grew 1.75%, which was a conscious decision due to pricing discipline. Year-on-year, corporate advances grew 6.95%.

We have been aggressive in the RAM segment, where spreads are higher. Our strategic objective is to move towards a 60:40 RAM-to-corporate mix, and we are progressing well in that direction.

As of December, the ratio was 57:43. It has now improved to 59:41, and our endeavour is to reach 60:40, possibly by the next quarter.

How do you see corporate lending growth going forward?

We have Rs 20,000 crore of corporate sanctions under discussion, which should translate into disbursements. While remaining conscious on pricing, we see good momentum on the corporate front as well.

There has been a sharp decline in current account deposits on a quarterly basis. What explains this?

One large account of Rs 26,000 crore was mobilised on September 8, which subsequently moved out. Excluding this, current account balances have grown from Rs 49,000 crore to Rs 54,000 crore, reflecting healthy growth.

On a YoY basis, current deposits are up 14.92%.

CASA growth remains under pressure across the industry. How is Canara Bank positioned?

CASA deposits have grown 9.32%, and the CASA ratio remains stable at 30%, despite industry-wide pressure.

We have rolled out several industry-unique savings products targeting different customer segments such as premium Payroll Account for salaried professionals, Canara Aspire for students, Canara Angel for women, Canara Crest for HNIs, and Canara Jeevandhara for pensioners.

These products offer differentiated benefits, helping us retain CASA share.

Post GST rationalisation, which segments have seen strong credit demand?

The vehicle loan segment has grown 26.20% YoY, the highest among all segments.

Housing loans grew 17.58%, while overall retail advances rose 31.37% YoY, reflecting strong demand post-GST rationalisation.

Traditionally, Q4 is one of the strongest quarters. Given the momentum built over the first three quarters, we expect similar or better performance in Q4.

There is a sharp rise in credit to petroleum, coal products and nuclear fuel. What explains this?

The increase is entirely due to exposure to PSU and Navratna companies. There is no exposure to private companies in this segment.

Treasury income has risen sharply compared to peers. What drove this?

We booked gains from offloading stakes, 14.5% in Canara HSBC Life and 13% in Canara Robeco.

Additionally, treasury benefited from arbitrage opportunities post repo rate cuts, especially due to higher forward premiums, which were effectively capitalised.

Did the bank benefit from OMO auctions?

We participated with bids of around Rs 6,300 crore, but gains were modest at about Rs 53 crore.

Any plans to transfer accounts to NARCL in Q4?

One account has already been transferred this financial year. Two more legacy accounts have been identified, but bids are still under discussion. Final decisions will depend on valuation consensus among lenders.

What progress has been made on M&A financing after regulatory easing?

We already have a dedicated internal project group at the head office. While traction has been limited so far, we are prepared to capitalise on opportunities, particularly through our four overseas branches for acquisitions of overseas subsidiaries.

We have 14 Large Corporate Branches (LCBs) with adequate technical expertise and remain disciplined on pricing.