Canara Bank has lowered its guidance on net interest margin (NIM) and growth targets for the current account and savings account (CASA) by two to seven basis points (bps) for the current fiscal, managing director and chief executive officer K Satyanarayana Raju has said.
The bank now expects NIM to stabilise at 2.8-2.83 percent from earlier estimate of 2.9 percent, Raju told Moneycontrol in an interview on January 28. Similarly, CASA growth for FY25 has been revised to 31 percent from 33 percent projected earlier.
According to the bank’s investor presentation, NIM has seen a reduction of 22 bps since March 2024. The quarterly NIM stands at 2.71 percent and cumulative at 2.83 percent. This is sharply lower from 3.07 percent quarterly and 3.05 percent cumulative in March 2024.
CASA deposits were down 2.61 percent at Rs 3.77 lakh crore from the previous quarter. Savings deposits fell by 3.24 percent to Rs 3.3 lakh crore.
On January 27, Canara Bank reported a 12.25 percent year-on-year increase in standalone net profit at Rs 4,104.20 crore for the December quarter.
Edited excerpts of Raju’s interview:
Why have the savings account deposits gone down?
Depositors are moving funds into retail term deposits due to higher interest rates compared to savings deposits, which has led to a fall in savings account deposits in the current quarter.
What will be the impact of the new liquidity coverage ratio (LCR) norms?
LCR is expected to get hit by 10-11 basis points after the implementation of these norms. Currently, we are above the LCR regulatory requirement of 100 percent. At present, we are at 123 percent LCR.
Why are NIMs still under pressure?
The interest rate on deposits has increased steeply and especially in the bulk deposits, whether it is CD or bulk deposits, it is now almost touching 8 percent. Under such circumstances, when your cost of raw material is becoming costly, and your final product sale price is the same, then automatically the impact will be on the margins.
Whatever the cost is escalating... it has to be absorbed by you. That's why your NIMS are shrinking.
Are you going to change your guidance?
Except NIMs and CASA, we keep our target for other parameters intact.
We are expecting that NIMs may touch 2.8 percent to 2.83 percent. CASA growth will be 31 percent.
Why has the Special Mention Accounts 1 (SMA1) loan book gone up?
There is one Telangana State Exposure account which was there in SMA 2 last quarter and has now moved to the SMA1 category. In the next quarter, this account will be out of the SMA category and become a standard account because the repayments have started.
Can you tell us something about the subsidiary in Tanzania?
We have closed that business operation. It was a 100 percent subsidiary of the bank. We have sold it to Tanzania Exim Bank. We have completed that entire process. Whatever the loss had to be absorbed has already been done. The bank has provided approximately Rs 38 crore.
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