Canara Bank shares slid over 4% after the public sector lender reported its Q3 results, with the stock reacting negatively to pressure on core income and margins despite strong headline profit growth.
Canara Bank shares touched a day’s low of ₹150.57 after opening at ₹158, compared with the previous close of ₹157.74. The stock also hit an intraday high of ₹160.79, which coincides with its 52-week high, highlighting the sharp volatility seen post results.
For the December quarter, Canara Bank reported Net Interest Income (NII) of ₹9,252 crore, registering a modest 1.1% year-on-year growth. The figure fell short of the CNBC-TV18 poll estimate of ₹9,453 crore, which appears to have weighed on investor sentiment, as NII is seen as a key indicator of sustainable core banking performance.
Net profit for the quarter rose a healthy 25.6% year-on-year to ₹5,155 crore, comfortably beating the CNBC-TV18 estimate of ₹4,932 crore. However, markets remained cautious as the sharp rise in profitability was largely driven by non-core income. Other income jumped 36% year-on-year to ₹7,899.4 crore, compared with ₹5,802 crore in the corresponding quarter last year, raising concerns about the quality of earnings.
On the asset quality front, the bank delivered a steady improvement. Gross NPAs declined to 2.08% from 2.35% in the September quarter, while Net NPAs eased to 0.45% from 0.54%. Fresh slippages during the quarter narrowed marginally to ₹1,857 crore from ₹2,031 crore sequentially, and write-offs fell to ₹3,120 crore from ₹3,463 crore in the previous quarter, indicating better stress management.
Provisions edged up slightly to ₹2,414 crore at the end of the quarter, compared with ₹2,354 crore in September. While the increase was marginal, it reflects the bank’s continued focus on balance sheet strengthening.
Growth metrics remained robust and above guidance. In its investor presentation, Canara Bank reported a 13.6% year-on-year rise in global advances to ₹11.92 lakh crore, while global deposits grew 12.95% to ₹15.21 lakh crore. Both loan and deposit growth exceeded the bank’s earlier guided range, offering long-term positives for the franchise.
Despite these positives, Net Interest Margins (NIMs) narrowed sharply by 33 basis points year-on-year to 2.5%, from 2.83% last year. Margin compression, coupled with lower-than-expected NII, appears to be the key trigger behind the sharp fall in Canara Bank shares after the Q3 earnings announcement.
