State-owned lender Canara Bank is likely to report a higher net interest margin in the current financial year than guided earlier, Managing Director and Chief Executive Officer K Satyanarayana Raju told Moneycontrol in an interview.
“This is an all-time high for the bank at 3.05 percent. Maintaining it at this level is a tough task in the present circumstances, when CASA is not growing as it is supposed to grow. In such circumstances, we generally give a conservative guidance, but are sure that we can manage it in and around 3 percent,” said Raju.
The lender has issued an NIM guidance of 2.90 percent for financial year 2024-25, which is 15 basis points lower than the actual numbers for FY24.
On the Central Bank Digital Currency (CBDC) front, Raju said Canara Bank has around 4,50,000 customers onboarded and 13,000 merchants, with transactions crossing the 30 lakh mark.
Further, he said Canara Robeco Asset Management Company’s public issue would hit the market in the last quarter of this financial year, while Canara HSBC Life Insurance Company would likely follow in the next financial year.
The interview has been edited for clarity. Excerpts follow:
Your savings deposits grew only 3% on-year in Q4FY24. Why is there slow growth and what is the outlook?
Between December and March, there was incremental growth of 63 basis points (Bps) due to whatever steps we have taken during the financial year.
In savings deposits, there is Savings Deposit-Individual and Savings Deposi-Institutional. The SD-Individual has actually grown 7.05 percent or 7.09 percent. Absolute numbers also increased by around Rs 16,000 crore. However, SD-Institutional has not grown much as institutional deposits are drying up because of the central government’s policy. So, that is the reason there is no growth.
So, while it is showing that combined growth is 3 percent, SD-Individual is actually growing at around 8 percent. This year we are sure that we will grow at a better rate.
Also read: Canara Bank Q4 net profit rises 18.4%, asset quality improves; declares Rs 16.10 dividend
Which initiatives are in the pipeline right now and when will they be launched?
We are launching several things, even green deposits, on a fortnightly basis.
On the digital side, we have onboarded software for comprehensive customer relationship management, which will come into effect from June. So, that will take care of the customer segment—we can ensure that counter-level services are much better.
We have seen that CASA growth in urban and semiurban areas is much better than metro cities, so we are opening new branches—around 250 branches—in the current financial year. Last year we opened 211 branches.
Why has the bank given a lower NIM guidance?
In FY23, our NIM was 2.95 percent. It was a very difficult year for us, but connecting with borrowers, discarding existing limits and shedding low-yielding advances is starting to give us results. That has helped us improve our NIM. While all other banks’ NIMs have fallen, our NIM has increased by 10 bps. This is an all-time high for the bank at 3.05 percent. Maintaining it at this level will be a tough task in the present circumstances, when CASA is not growing as it is supposed to grow. In such circumstances, we generally give a conservative guidance, but are sure that we can manage it in and around 3 percent.
You have had more slippages in Q4FY24. Can you tell us from which segment these fresh slippages came from?
It is distributed across sectors. Two accounts worth Rs 400 crore have turned into NPAs. Of this, one account is likely to get upgraded.
Canara Bank has Rs 1,431 crore in NPAs from the textile segment. Which are these accounts?
We cannot disclose the names of the accounts. These are legacy accounts and not fresh slippages. These accounts are four-five years old, from before the Covid pandemic. The process for resolution is on, but it will take time. The reduction will happen, but it is difficult to tell by how much.
Do you have any borrowing plan for FY25?
We are not planning anything so far. We are yet to finalise our capital planning. We will definitely raise some funds through bonds, maybe in the form of AT1 bonds or tier-2 bonds. We have to see when the rates are competitive in the market.
Also read: Canara Bank to maintain 80-83% investment in HTM category, says ED Debashish Mukherjee
How much will you spend on IT infrastructure in FY25?
The capex on IT will be more than Rs 800 crore.
How many CBDC users do you have and what are the transaction levels?
We have around 4,50,000 customers and 13,000 merchants onboarded. Transactions have crossed 30 lakh as on date.
Can you tell us something about the stake dilution in your arms?
We have two subsidiaries, Canara HSBC Life Insurance Company and Canara Robeco Asset Management Company. In these two subsidiaries, we have a 51 percent stake.
We have got all the approvals. Canara Robeco Asset Management Company’s public issue will come to the market in the last quarter of this financial year. As for Canara HSBC Life Insurance Company, in the next one or two months the board will clear that proposal. It may come to the market in the first quarter of the next financial year.
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