Canara Bank Ltd
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Canara Bank Ltd
Earnings Call Analysis
Q2-2024 Analysis
Canara Bank Ltd
The financial narrative of this earnings call hinges on a prudent and aggressive approach to setting aside significant provisions for potential risks. Notably, the company has maintained a provision coverage ratio (PCR) exceeding 88.73% with aspirations to hit the 90% mark within the financial year, signifying its readiness to cover for any foreseeable asset quality issues. In anticipation of future expenses, such as employee-related arrears tied to bipartite settlements due since November 2022, the company strategically allocated INR 345 crores this quarter to avoid any balance sheet shocks.
While the restructured book initially stood at INR 24,000 crores, current outstanding figures are roughly INR 20,000 crores, with INR 14,000 crores still classified as standard assets and about INR 6,000 crores having deteriorated to non-performing assets (NPAs). This shift indicates that the company is effectively managing its credit risks and working toward decreasing its overall stressed assets.
A positive turn is observable in asset quality indicators as gross and net NPAs have constricted, the credit costs are constrained, and the return on assets (ROA) stands at a robust 1.10%. Additionally, the statistics reflect an all-time low in special mention accounts (SMA) with exposures above INR 5 crores, dropping from 1.11% to 0.70%.
To address the historically low current account and savings account (CASA) percentages, the company is rolling out multiple customer-oriented programs. Efforts are targeted toward improving service delivery, with an array of innovative product launches aimed at salaried, retired, and non-salaried classes. The company also reports increased uptake in salary accounts, climbing from 14 to 20 lakh accounts within half a year, signifying successful CASA accrual. Emphasizing digital expansion and bespoke banking solutions for different customer segments, it plans to boost the CASA segment further, demonstrated by significant absolute growth in savings and current accounts by INR 4,500 crores and INR 2,000 crores, respectively.
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Good afternoon, everyone. On behalf of Antique Stock Broking, we welcome you all. We have on the Canara Bank management team side, Mr. K. Satyanarayana Raju, MD and CEO sir; Mr. Debashish Mukherjee, Executive Director; Mr. Ashok Chandra, Executive Director; Mr. Hardeep Singh Ahluwalia, Executive Director; and Mr. Bhavendra Kumar, CGM and Executive Director, along with other senior members of the team.
Thank you, sir, for giving us this opportunity to host the Q2 FY '24 post-results earnings call. Without further delay, I hand over the call to MD sir for his opening remarks, post which we can open the floor for any queries. Thank you, sir, and over to you.
Good evening, sir, for all the investors and all our well-wishers. I wish to share some few of the highlights of this quarter performance with all of you. Of course, by the time, you might have gone through our presentation, still for the starting, I want to share some few of the glimpses on this.
Our total business has grown year-on-year, first time, double-digit growth in the last few years and reached -- touched it on a high level -- total business level of INR 21.56 lakh crores. And our gross advances has grown at 12.11% and stood at INR 9.23 lakhs. Our operating profit has reached INR 7,616 crores with a year-on-year growth rate of 10.3%. Our net profit has reached INR 3,606 with year-on-year growth rate of 42.81%.
This profit -- operating profit and net profit, we could achieve it because of a good growth in the net interest income with the 19.76% in the year-on-year and reached to the position of INR 8,903 crores. Our RAM credit has grown at 13.63% and stood at INR 5.6 lakh crore.
Our gross NPA has reduced 161 basis points year-on-year and reached to that below 5%, that is at 4.76% and our net NPA has declined 78 basis points year-on-year and reached at 1.41%. And our PCR has further improved to 88.73% with a year-on-year change of 337 basis points upwards.
Our retail credit growth has now crossed double-digit figure, and it has grown at 10.56% and the total amount stood at INR 1.48 lakh crores, and it is led by the housing loan with a 12.32% and education loan at 14.68% and vehicle loan at 9.29%.
Our return on equity, we continued the good performance that stood at 22.51%, with year-on-year improvement of 514 basis points. Our CET1, that's a common equity, it's through internal accruals, we could achieve 11.58% all-time high that year-on-year improvement is 44 basis points. Our return on asset, first time in the last decade, we have crossed 1% and stood at 1.01%, with year-on-year improvement of 30 basis points.
We are able to contain our expenses and maintained well before -- below the 45% of our cost-to-income ratio, and it stood 43.68% with an improvement of 53 points year-on-year. Our net interest margin, though there is a stress on the interest expenses, we are able to maintain just above the 3% that we stood at 3.02% with year-on-year improvement of 19 basis points.
These are all the few glimpses we have shared with you, sir. But I'm sure that you might have gone through all our presentation -- entire presentation. Along with me, all our 4 Executive Directors are there and all our top management is here. We are happy to receive clarifications or corrections on our performance in this quarter, sir. It's now open for all of you, sir.
[Operator Instructions] So we have the first question from the line Mahrukh Adajania.
Congratulations, sir. Yes. Sir, basically my first question is on the outlook ahead for margins. And the reason for that is in the festive season, all banks are offering lower rates on incremental loans like some retail incremental loans. And all banks have increased their flagship deposit rates as well. So would that from here on, will we be able to hold margins at 3? Or what is the outlook like given that there's so much deposit competition, lower -- higher rates, et cetera? That's my first question, sir.
Yes, madam. Actually, it is true that there is a stress on the interest expenses, but sourcing of liabilities is not a big issue. There is a consistency growth in our liability side as we've given the guidance of at 8%, we are growing the domestic deposits more than 8.8%. Even retail term deposits in absolute number, there is a growth of almost INR 20,000 crores in the last 6 months.
Even in the savings bank, there is a INR 4,000 crores growth. In current account, there is more than INR 1,000 crores and absolute numbers growth is there. That means the growth is there, but it is the present rate of interest what we are offering to the public and the term deposits is high.
I don't see any further increase in the term deposits because there is a continuous inflow is there, and we are not finding any difficulty in raising the resources at this rate of interest. So that's the said, but because already we are offering at a higher rate of interest, our pressure on margins is continuing.
So if the liquidity improves in the system for next 2 quarters, then the inflow may increase. If the inflow increases, our cost of deposit may come down, then we may be able to maintain around 3, 3.05 what we projected. But the -- but the current scenario continues with a high interest rate and the same liquidity issue is there in the next 2 quarters, we may land up at 2.9%, that is the range what we are expecting in the coming quarters.
Okay, sir. That's so clear and helpful. Sir, my next question is on the new investment guidelines by RBI, which are not yet applicable. What will be the impact on Canara Bank?
We have made some assessment, not much impact will be there in our case because our mostly holdings are in HTM portfolio, so not much impact. That is all we can say right now.
So we have the next question from the line of Mona Khetan.
Yes. Sir, my first question is on the provisioning line. So there is this other provisions of INR 222 crore, what exactly is that about?
See, this is -- see, last 1 year also, we are building up this. We have some stress in 1 big account of LRD, that of course, as it is, it is continuing in that SMA. But in anticipation in the future, any shocks is there to prepare ourselves, we are providing additional provision for that. That is only a cushion what we are taking that. But as it is, that account is still continuing in the stress, but it is not NPA. And last 2 quarters also, we have provided INR 458 crores for that account. The same account now we have provided additional INR 200 crores.
Okay. So total you have provided INR 458 crores? Or...
INR 650 crores.
Got it. And how large is this account? I mean we have provided INR 650 crores, so what -- how much have we provided?
This, it will be sufficient to meet the requirement of the provisioning.
Okay. And so...
Even if it slips, but we don't see that, but in anticipation why to keep that when we have surplus. We are -- in the anticipation of that, we are providing this.
Got it. So will it be like 50% provisions against this account or higher?
Pardon? Pardon?
Will this INR 650 crores be like 50% provisions against that account or will it be higher?
Ultimately, whatever it is required, we have provided it. It's not...
Got it, sir. So I mean, apart from the NPA provisions, which we provide under the PCR, do we have -- and this INR 650 crore that you already mentioned, do we have any other provisions made against SMA book?
No, that's always we take a future-ready, that's the stand what we have taken the Canara Bank for the last 3 years that always our provisioning will be aggressive, seeing that the future-ready balance sheet. The same tendency is continuing every quarter. Our provisioning will be always in aggressive side.
No. So I'm trying to is, against our SMA book, you mentioned this LDR account -- LRD account and against which you provided INR 650 crores. Is there any other provisions apart from this INR 650 crore against the SMA book or any particular account in that...
See, when we -- our PCR is more than 88.73%, that itself shows that how much extra it is there. It's not required to be disclosed in individual account wise how much we provided. We are already maintaining a provisioning PCR coverage ratio. We have given a guidance that we will try to reach 90% by the end of this financial year, and we are moving on that direction. That means that it's not that required only the required provisioning we are making, we are making provisioning beyond that.
In addition to that, whatever the employee's expenses because you know that the bipartite settlement is due for that agreement and it is due for the last November 2022 onwards, we started providing that 15% every month. And this quarter also, we have provided only for that incremental. In future, suddenly if we have to pay that arears, there should not be any shock to that balance sheet. That's why we in anticipation of that, this quarter also we provided INR 345 crores for that.
Got it, sir. And just finally, on the restructured book, can you share the outstanding amount? And how much has slipped through the quarter so far?
Including RF1, RF2 and MSME restructuring everything, originally, it was INR 24,000 crores, madam. As on date, it is approximately INR 20,000 crores outstanding was there and INR 14,000 crores still continuing in the standard assets, around INR 6,000 crores is under NPA.
Sorry, how much is NPA?
INR 6,000 crores is already slipped to NPA. INR 14,000 crores is continuing in the standard assets, INR 4,000 crores liability has come down.
The next question is from the line of Mr. Ashok.
Compliments to you, sir. Raju sir and the entire team for the excellent result in this quarter. On -- in fact, if you see on all the parameters, including the profit, net profit, your gross NPA has come down, net NPA has come down. Credit cost is also under control. And ROA is also 1.10%. So excellent results, sir.
Just I picked up one point out of that LRD accounts, sir, which is under SMA2. Now the SMA2 total figure is INR 4,413 crores. In the last quarter, it was INR 3,367 crores. So if this INR 4,413 crores includes was it in SMA2 even in the last quarter also, which is not possible actually.
No, sir. Now this quarter, that is in the SMA2, sir.
So it means the other SMA2, the balance...
Has come down.
Has come down. That's what...
Has come down. That has reflected in our SMA position also. If you see that, our SMA positioned INR 5 crore and above last quarter, it was 1.11%. Now it is 0.70%, all-time low.
That's very good, sir. Sir this being LRD account, we must be having very good securities in...
We don't have literally any problem in that account because we are secured by more than 150% hardcore, hard city properties. It's not the question of any issue is there, it's -- but in anticipation of any such shocks, it should not impact our balance sheet, we are preparing ourselves. That's all.
That's definitely a prudent, and that gives a lot of comfort actually because I mean even if it slips the recovery prospects are very fast and very good being having 150% coverage. Point well taken, sir.
Sir, on the CASA side, sir, I mean historically, our CASA percentage is lower as compared to many of the peer ranks. As for last quarter, it is improved a little bit. So going forward, sir, are we doing something aggressive even in this scenario? Is it possible to increase CASA? And what is our target so that we become more competitive in the market on the interest rate front, sir?
We strongly believe that CASA can be garnered by improving our customer service by reconnecting with them. So for that, we have taken several initiatives in the first quarter. We already shared with you all that the products, innovative products, what we launched for targeting the salaried class, retired people and specialized nonsalaried class people.
We have come out with several new initiatives, and that has attracted very well, and salaried employees knew, because of the product, that product covers that gives the term life insurance coverage to the people who opt to the Canara Bank as their salary disbursing bank, they are getting a term life insurance at a free of cost instead of -- in addition to the accidental death. That has helped a lot in that. Our existing -- actually, before commencing this product, our existing total salaried class who draws their salaries from Canara Bank was INR 14 lakhs. Now it has touched INR 20 lakhs. Then in the last 6 months, we almost garnered the 6 more lakhs new salaried class and simultaneously for Jeeva Dhara pensioners, we have given the new accounts.
In that, we have had a tie-up with one TPA whatever it is there in that we are extending some benefit to them. And we have created a customer relationship manager to handle the top 150 customers of individual HNI customers of individual branch in 5,000 branches and several initiatives we have taken. Even we are popularizing our digital footprint and we are the first bank, who has come out with so many new initiatives in the current financial year. Interoperability in credit card, linking with the credit card with UPI, making more friendly by our mobile app, so many initiatives we are taking to attract the younger generation.
The existing loyal customers aren't the separate sectors. And we are also coming out with 2 more new features into products targeting the younger generation, professional students and women separately. There are 2 more new schemes. We are working on that. We will launch very soon on that. And we are also launching a corporate mobile app for corporate clients. That also is a very -- I can say that very few banks are in India now it is offering that benefit that we are already launching or about to launch in another 1-week time.
And API banking, we are making it more and more customer friendly. We are taking several initiatives and focusing on this CASA. So we believe that we can improve that because you can see that the absolute numbers, there is an increase, almost INR 4,500 crores, INR 4,200 crores in savings bank and almost INR 2,000 crores in account that you can see that absolute number is increasing.
That itself is creating a confidence once the liquidity and the system improves, our CASA will improve definitely as we expected. And definitely, we are targeting -- our immediate target is to maintain that existing level of percentage because the balance sheet is growing double-digit growth to maintain that we have to grow double digit in the CASA, then we have to think beyond that then to improve your legacy issue of low percentage. So our first focus is we don't want to slip from that the existing percentage. We want to maintain that. And there afterwards we want to further build on that with our initiatives. I'm sure that with our initiatives, we will build up that.
Sir, from here, can I just take it on our digital journey, sir?
Sir. Ashok sir, tell me, sir.
Can you hear me, sir, now?
Yes, sir. I can hear you, sir. Tell me, Ashok sir.
From here, can we -- can you take us through the digital journey, sir, now because you said so many initiatives? Can we have a little more detailed report or kind of an answer on our total digitalization or digi banking with your -- all these initiatives and what kind of budget which we have and we have spent, how much have gone to P&L and how much have gone to capital account assets?
Definitely, sir. Definitely. Definitely. Let me explain to you that -- on that. First of all, before -- because you are expecting us to talk on the digital, let me share it with you on a happy moment, I can say that consecutively last 2 years MEIT, Ministry of Electronics and Information Technology is ranking the Indian public and private sector banks together. There are 47 banks. They rank it every year based on their journeys, their target versus achievement and the growth in the transactions, growth in the POS machines, growth in the merchant establishments, growth in the reaching of the villages and northeastern states and all.
And consecutively last 2 years, among these 47 banks, the Canara Bank stood #1.
Congratulations.
With 92 marks out of 100 marks. 92 marks out of 100 marks, 90 above, no bank has scored. All are in the below 87. I can say that 87 is the highest marks. That shows that how much importance we are giving for the digital front. Whatever I shared last time, continuing to that, even CBDC, we are the first banker who made it interoperable in the Canara Bank. Though we started our CBDC onboarding in the third stint, but we are the first banker made it interoperable, so that the other person need not have a wallet of CBDC. Even if he's having a UPI, he can transact with the CBDC currency transactions. That interoperability in India, we are the first banker who has introduced that.
The second one is when the RBI is talking about a frictionless credit, the fastest STP route, first initially, they have started implementing on experiment basis in Madhya Pradesh, and the 6 banks have started on August 10, and we are one among the 6 banks. And it will be spread across all the remaining -- it is expected to be spread in 25 states based on the revenue record digitization and all. Once that has been done, there will be a sea-change in the sanctioning of the agricultural credit. It will be no time, the credit will be -- happen. You can say that it's less than 3 minutes or 4 minutes. That we have, fortunately, RBI innovation hub in Bangalore headquarters. We have very good relations with them. We are continuously having a separate team engaged with them.
And recently, just 1 week back, our self-help group frictionless credit. And we are the first banker. We experimented, we successfully launched, and we are expanding it on that self-help groups STP route. There won't be any manual intervention. Directly, that self-help group loans and all will be done. Simultaneously, we onboarded the digital lending platform from end-to-end and the progress integration is going on. We expect that the 6 products will be launched at end-to-end by December 30.
And in that, including the Mudra loans, the clean loans, the personalize loans, first initially, we will start that. There afterwards we will extend it to the other personal loans. And there are several such initiatives, we are aggressively going on that, sir, especially, we are making our analytics -- business analytics wing so strong. We increased their strength from earlier originally started from 3 people to now it is almost touching 45 people. We want to further strengthen it by using the latest tools on that, that we want to use it effectively in enhancing our business, new garnering the business, and we are giving more trust on cross-selling by using the business analytics.
The next question would be from the line of Mr. Mayank Kumar Gulgulia.
Sir, first, like interest on balance with the RBI, that amount used to be INR 500 crores to INR 600 crores 1 year back and it has increased to INR 1,000 crores to INR 1,100 crores. Can you tell what has led to that jump in there?
That is interest earned or interest spent? See, the interest earned is generally when there is a liquidity issue there in the market. If your treasury operations are effective, whatever that's overnight lending to the other required needy reported entities, so you can earn more interest though, overnight interest, whatever it is there on that. So that's the effective operations that benefit we are getting it. And another is automatically, whatever the interest we are getting it -- see, interest on investment is there. The interest on call money market, CBLO, whatever we are investing it, that income it is increasing on that.
Okay. Actually, jump in interest income, that amount is much sharper than like movement in cash and equivalents.
No. If you compare to June to September, it's hardly INR 230 crores. It's not a sharp increase. You might be comparing 1 year back. One year back, the system itself is having ample liquidity. There is no much demand in the overnight lending and all, call money market and all. It's market-driven. If tomorrow ample liquidity is there in the system, again, this interest income may come down.
Okay. There's no one-off, it's pure money market and balance with the RBI. There's one-off in this -- there's no swap -- interest income from swap. There's no one-off in this amount.
These are all the -- that's the details what we have given it to you. Further details, if anything is required, our CFO will forward to you.
Okay. Sure. And within a fee-based income this quarter, miscellaneous had jumped to like INR 840 crores. It used to be INR 500 crores to INR 600 crores. So can you share like the jump in that line?
Yes, sir. See, debit card annual fee, the check -- so these are all the fees, SMS alerts, recovery in written-off accounts. So these are all the regular various parameters, those incomes, that annual fee of the debit card has increased, that annual card also is there. Actually, what will happen, last time, I can say that they clearly compared to the previous year. Last year, whatever the hike in that interest acquiring cost of the debit card has been borne by the bank.
And for passing on to the customer, it took time, 6 months' time. The plastic card cost was increased enormously last year from INR 24 to INR 84. But the first 6 months, it was absorbed by the bank. That's why it was not reflected in the last year. But there afterwards, from December onwards, it was started passing on to the customers that has helped us in getting the same amount.
Okay. Got it. So this will be a recurring income going forward also, like it will be like around INR 800 crores or so?
There may not be a reduction on that much on that.
Got it. That was helpful. And lastly, like recovery from written-off account, it was INR 1,612 crores in noninterest income and on the asset quarter slide, we have shared INR 1,791 crores. So can you share accounting treatment of remaining INR 179 crores?
No, sir. Actually, exactly account to account share [Foreign Language] it will be not good personally, but actually, NCLT, I'll tell you that through NCLT recoveries under written-off accounts, total whatever it is we received that, there's around INR 650 crores, we got through NCLT settled accounts. The remaining all amount has come through either the OTS or the existing small ticket size recoveries.
I'm looking from the entire written-off accounts.
Just 1 minute. Our CFO will explain to you the difference.
Your query is that in this -- in one place, we are saying INR 1,612 crore and in the Slide #28, we are saying as INR 1,791 crore. That is your query, isn't it?
Yes.
Interest amount.
That difference is that interest amount, whatever amount is received...
Interest on those written-off accounts, if you have received book balance, it will be treated as actual recovery. If you have received beyond that, that will go to the income head. That is an interest amount. That's the difference is only the interest on written-off accounts also recovered.
No, the balance amount is taken as part of the interest income, other interest income.
The next question would be from the line of Mr. Jai Mundhra. Jai? Not able to hear you. So we'll take the next question from the line of Mr. Anand Dama.
Sir, basically the LRD account that you're referring, is it more specific to the bank where you -- or basically, that account is where you're seeing a stress? Or is there a general stress in the LRD segment? Number one. Any other banks...
No, no. It's a specific -- that is specific to only single account.
Okay. And otherwise, basically not seeing any stress in the LRD segment?
No, no, no. Not at all.
And sir, any other bank has an exposure to that account?
Pardon?
Any other bank also has an exposure to that account?
No, no, no. LRD is -- sole accounts only will be there generally 99%.
Okay. Sir, basically, what is the reason for the stress in that account?
See, it's -- actually, it has started from COVID. It's a mall. So when it is a mall in COVID, there is an issue, so when there is a reoccupancy has come, that's sometimes they were struggling in the cash flows and all. That was the reason, but we expect that the promoter will take care of that whatever it is required. But they are trying their best. But in anticipation of future-ready, we are making it additional provisioning. It's a precaution and nothing else.
Okay. So we are 100% provided on that account. Is it sir?
No, there is no question of 100% provision there. Whatever it is required, we already provided.
Okay. And sir, secondly, the effective tax rate seems to be again on a higher side. So is it more to do with that, we have had decent recovery during the current quarter, that's the reason we've been on the higher side?
Effective tax rate, CFO.
No, no. This is the tax, whatever provision we made is in anticipation of the profit that we expect to make during this year. You must remember, so far, whatever tax provision we were making that we were having accumulated losses with us. Now that is completely wiped off. There is no accumulated loss with the bank. Now whatever is the expected operating profit, based on that only tax provision has been done.
So basically, we have moved to the newer tax regime, right? So our effective tax rate...
Yes, yes. This provision is based on the new tax rate only.
For full year, it should be 25%, right, effective tax rate?
You are aware of it. It is 25% only is my tax rate and whatever provision we are making is based on that only.
Lastly, sir, on PSLC fees. This quarter, the PSLC fees has actually come off. So any strategic reason for lower...
See, you should aware about that. I'm sure that you are aware about those things, sir, the PSLC certificates the demand be there in the first quarter because the bank also will get a full year benefit, the bank which purchases. That's why whatever the opportunity it is available, we try to encash it in the first quarter. And the same will not be there in the remaining 3 quarters. That is the general phenomena. But again, in the June quarter, we can earn more money on that.
Next year?
Yes, sir.
We will go to...
This is Jai Mundhra. I'm sorry, I could not speak earlier. Congratulations on a great set of numbers, sir. I have a question, sir, on your loan yields, right? So loan yields, whichever way I calculate, they have increased at least by 25 basis points Q-o-Q and someone was also asking that is there any component of NPA recovery in the interest income. So if you have that number, is that number like INR 200 crores odd or there is some number -- some more income that has come from NPA recovery and the increase in loan yields because if you look at RBI data, right, they give the monthly WALR and lending rate number, that and also other commentaries of the other banks, the lending rate seems to be stabilizing only. But for our bank, it has increased. So any comments there?
No, our lending rates, actually, we are very closely -- very margin conscious decisions we are taking when we are giving a corporate side the decisions, credit decisions. But we have focused more on RAM sector where our average yield is always around the 9%.
So you can see that the growth in the current quarter, quarter-on-quarter, more than 5%, we have grown in the RAM sector as against that 2.5% in the corporate sector. That is helping. And in the corporate sector also, we are trying to reprice our existing low-yielding advances. If necessary, we are trying to reduce that exposure and redeploying it in a better pricing way. So that's the reason rejigging is happening at the corporate level that is helping us in maintaining that increase in the average yield.
Okay. And what is the total NPA interest that has come in interest income, sir?
That will be regular routine. I think it will be -- it will not be even 4 digit. It will be very -- 3-digit figure only. Exactly I didn't remember, but our CFO will share it with you directly.
That is the difference, what previous that is...
No, interest on NPA account, so he is asking. That's what, I read around INR 1,000 to INR 1,100 crores, sir.
No, no, no.
INR 450 crores.
So sir, I mean INR 450 crore is the NPA interest that has come in the interest income, right?
No, that every quarter, you get. It's not that this quarter, you are getting it. Wherever in the NPA balance is there, if you can recover beyond the balance, that interest on NPA will be there. It's a part of the general banking. And every year -- every quarter, that will be there. It's not that this quarter, you got the additional amount in the form of that INR 450 crores. Every quarter on an average is INR 300 crores to INR 500 crores, you will find that interest on NPA accounts.
Okay. So nothing unusual here?
No, no, no, nothing unusual.
Secondly, sir, on your cost of deposits, while you mentioned that cost of deposit remains under pressure. But given your envisaged deposit growth, where do you think this should stabilize? Or do you think it will not stable at least for the next 2, 3 quarters?
So at this moment, we see that there is -- we are experiencing that there is a stress on our margins because of interest on deposits. But there is no struggle in mobilizing the deposits. There is a continuous flow in our retail term deposits in savings bank and current account. Maybe savings and current the growth is very slow compared to the retail term deposits. Retail term deposits growth is good. Even quarter-on-quarter, the retail term deposit growth is more than 3%.
So growth is there. But that rate of interest, what we are offering is special scheme 7.25%. 7.25% is comparatively very high. That is continuing now at this moment. At this moment, there is no plans to reduce that rate of interest. At the same time, there is no plan to increase also because there is a continuous flow. Whatever we require, we are getting that funds at this rate. So we don't see any further increase in the rate of interest. But -- however, paying 7.25% is definitely a burden in coming quarters.
Okay. And sir, if you were to put a median number to your bulk deposit wholesale rate, what would that be range? I mean, let's say, what would be your rate for bulk deposits? And how has that trended?
No, bulk deposits, depending on the period, it varies from 6.5% to 7.5%, 7.7%. That is average. It is coming even 6.5% if you are taking it a short-term repos. So that's why we are making our bulk deposits or CD in the composition of that you -- combination of 3 months, 6 months and 12 months. In that way, on average, we are trying to maintain below 7.5%.
Okay. Understood, sir. And last question, sir. Some of the banks have reported treasury loss this quarter. Of course, our treasury team has done phenomenally well. But just wanted to check, was there any MTM in the G-Sec, which would have been offset by something else? Or there was no MTM?
No such anything special, sir. It is a regular [Foreign Language]. But look at that you are comparing with the last quarter, then you are telling that last 2 quarters, you are doing better. But if you compare year-on-year, I lost almost 50%.
Okay. And sir, if you have this number of loan mix by benchmark, how much is repo, how much is MCLR and fixed rate, that would be helpful?
Almost 50% is in MCLR, sir; 38% is in RLR; the remaining is staff loans, loans against deposits and all those things are there, sir.
The next question would be from the line of Ashlesh.
Can you hear me?
Yes, sir.
Sir, just a couple of questions. Firstly, on the wage hike provision, which you have taken at about INR 345 crores. What is the percentage wage hike which we are assuming here?
15%. Actually, the last 2 wage revision, it was around 14% to 15%. The settlement was happened. In anticipation of the same line, we are continuing to provide 15% every month. We have more than INR 1,150 crores provisioning in that so far. And we continue to provide.
Okay. Sir, and secondly, on the MCLR-linked loan book, we have taken a hike of only around 10 basis points since March '23. Do you expect any further repricing left in this MCLR-linked book?
Permissive growth in the loan book, sir?
In the MCLR-linked loan book, do you expect any repricing left?
No, that's repricing almost it is coming to the end. See, the MCLR 50%, our exposure is there. And we have revised MCLR there. It's almost coming to the end.
Okay, sir. And sir just one question to end with. The profit on exchange transactions line item within noninterest income that has been steadily declining. Is there any reason for this?
Pardon?
Profit on exchange transactions.
That is a treasury -- that is a treasury transaction. You know that the treasury transactions are happening because of market conditions only. It's nothing beyond the control of the individual, sir. It's because of market conditions. Trend is like that.
Before we move on next participant. Just one question from my side, sir. Your SMA number has reduced to 0.70%. How do you see fresh slippages spanning out in the second half of the year?
We feel that we can continue with that, sir. The percentage what we have shown, that 0.70, we are confident that we maintain that percentage.
So next question would be from the line of Sushil Choksey.
Congratulation, Team Canara, for excellent performance. Sir, my first question is based on the entire digital spend, you worked out rolling out with lot of co-lending and various other partnerships, onboarding of corporates and SME for digital initiatives you would have taken for many products. Will second half not go much better than the first half because of your outlook on RAM as well as existing retail products is getting better?
No business front, we see that definitely, the second quarter -- third and fourth quarters will be better than the second quarter on business front. But we are very conscious on the margins, too, sir. It's not we are taking the decisions based on the margin also. Only, we are not looking at the top line. We are looking at both top line and the bottom line. So our growth will be steady.
I don't say that there will be too much change in that. But we have given the guidelines -- guidance that our advances will grow at 10.5%, but we are already told initially itself that our advances may grow between the 12% to 14%. And we think that definitely, we'll grow at about 12%. And the total business, we have given a guidance of 10%, and we are going above 10%.
Sir, that is typical of Canara, be conservative and outperform. So that's fine. The second thing is your outlook, specifically based on where money market is concerned in India or globally, what is our treasury outlook and what is outlook on our international book, which may be yielding rewards right now?
Our Mukherjee sir, will answer you, sir.
Sir, with regard to the treasury book, not much significant difference will be there in the current quarter. That is what we anticipate. So far as our international operations is concerned, we are seeing steady growth there. Incidentally, we have gone in for opening of one IBU in Gift City, as you are aware, and that will be fully operational in this quarter. We have already started business.
So far as our international business is concerned, it is growing steadily. With regard to treasury operations, it will maintain the same pace as it was in this quarter. This is all I can say.
Sir, based on the outlook and what we have highlighted in press that we may be capitalizing on some of our subsidiaries in the IPO and some of our subsidiaries where market was seeing some problems have been resolved, and they started performing well. Can you give a gist because this time, I don't see anybody asking a question on them rather give us some positive color on the positivity, which has emerged in last one quarter?
Sure, sir. Actually, whatever we promised on the subsidiary, the actions are continuing it. We told already that in 2 cases, we will come out with the public issue and the respective companies are taking the necessary steps towards that because since it's a long period duration, it is -- things are going in the right direction. And again, we told that in one Can Fin Homes, now you are seeing that the uptrend is there. And we are very closely associating with them in their day-to-day functioning.
And we are -- and nowadays, we are trying to give as much benefit, the technology benefit to them also to internal control and to have a better monitoring systems. They are doing very good business, but they need support from us in the form of a technology support that -- which we are extending to that subsidiary. So that we are confident that, that subsidiary also will do well in the days to come.
Then fourth one is the shifting of our credit card business to a subsidiary. That is also the action is going on. Now recently, we posted a GM-level person as a general manager to take whatever the initiatives we have taken into that as an MD of that company.
Congratulations on excellent choice for Can Fin Home. Sir, my next question is on the digital spend which we had decided for a large amount. How much of that growth would be over in current year and what percentage of money would have been spent by now?
See, generally, on an every year, we are targeting a capital expenditure of around INR 1,000 crores to INR 1,200 crores in that, sir, And this year, almost 80% of that transactions have been completed. Maybe the payments may happen in a staggered manner, but the purchase orders and all have been given through. It has been done everything through Gem portal only.
And when you are investing heavily in the capital expenditure continuously for 3 years, naturally that ATS, whatever the annual maintenance charges and all, it increases your operating expenses to some extent, but that we are able to maintain even with that ATS extra charges by controlling that internal operating expenses by regulating our non-core branches and all, that we are able to maintain that well within that..
Sir, do you see a cost of income coming to 40% in the next 12 months?
No, sir. We don't see that. See, we -- given the guidance below 45%, we maintain that. It's a too big bang, sir.
Next question would be from the line of Omkar.
I just wanted to ask our agri book has grown very well, at almost 6% quarter-on-quarter. I wanted to know how much of this has come from the gold portfolio.
Actually, of course, gold portfolio also has contributed a good amount in this agriculture. We can say that the 4% is out of this 6.3% only, I'm giving the bifurcation, 4% from the gold and 2.37% from the core agriculture, but the core agriculture also has started picking up because of the self-help group lending and the rural infrastructure lending. Those things, the areas we have focused and we introduced some area-wise products also that are getting a good traction on that. That's the first time we are seeing even a core agricultural double-digit growth.
Sir, we have one question from chat box. If you could provide slippages breakup for this quarter?
Sir, you can note down that -- that is INR 800 crores is from agriculture, INR 900 crores from MSME, INR 400 crores from retail, the remaining is corporate. Corporate is around INR 750 crores, sir.
The next question is from the line of -- from Chintan.
Sir, two questions from my end. Firstly, on the branch network. So I see, sir, our branch member has been consistently declining, and it's almost near to 3 years low. So I just wanted to understand what is the strategy here on the branch expansion. That is my first question.
Actually, the post amalgamation, wherever it is a repetition of the branches in the same location has to be gradually -- has to be either relocated or the merger that was the decision of the Board. In that direction, every year, we are identifying some things, and we are continuing to close our merger to relocate those branches. But at the same time -- this year, we identified such 400 branches. But at the same time, we are also permitting the all our field functionary circles and regional offices to open 275 new branches where the potential -- CASA potential is there. So that's actually the part of the CASA when we focused more. This rationalization of branches are relocation of branches are opening up new branches is also a part of strategy to improve the CASA. That is indirectly helping us in operating expenses control also.
Sure, sir. But this rationalization is going on since the past 3 years, you mean, right? Since the amalgamation time.
See, the rationalization -- the rationale behind that is if suppose 2 branches are adjacent of just 500 meters or 300 meters of the same bank, when the technology is so high, and it's merely because it's -- because of the olden days, the 2 different banks, they have the 2 different branches. When it is merged, slowly, we are looking at those merging of those things -- branches.
Okay. Sure, sir. And sir, just one thing on the stress account just to catch up on that again. You locate that one account, which is the LRD, is under stress. Apart from that, any other accounts, which are kind of very much sticky in SMA and where do we think we could provide some in case we have any buffer or something?
No sir. That you can make out easily from our SMA figure.
Nothing. There is no other sticky account. No.
No, no, no. No account. That you can easily make out from our SMA figures.
So sir, provision on that, usually -- so you don't care we have been provided adequately. So that is like of 15%, 20% odd there or more? Would you just drop a comment on that number?
When we say that we are anticipating and providing more than what it is required. You should get the answer from that.
The next question is from the line of Bhavik Shah.
Am I audible? Congrats sir on good results. Just two questions. Sir, RBI has been flagging concerns of low savings account rate. As in ourselves, how should we read through that, like are you rating increase in savings account rate over a couple of quarters?
At this moment, we are not anticipating any upward revision in the savings bank accord interest rate. But we keep growing the market, if necessary, we don't mind to take such decisions. But I feel that the savings bank deposit, by increasing the rate of interest, you can increase the balance, sir. It's may not be the case. But it's more or less depends on the service and the satisfactory level of the customer that gives you more savings.
Understood, sir. And sir, circling back to one more comment that you indicated earlier that whenever the -- there is periods of constrained liquidity that interest on balance, component of the interest earnings will be high. Sir, is that also to do with your LCR ratio? So whenever the LCR ratio is high, you will kind of keep the deploying?
No, no, no, not at all. Our LCR is very comfortable. Actually, the last year, our LCR was 119. This year, we have touched almost 130 above. Now as on date, we are maintaining on an average 130 above. The regulator expectation is 100%. Our internally, we kept a barrier is 120, but we are maintaining well above that, even 120, and we are maintaining on an average 130 to 135.
Okay. So the excess that you are holding, is that helping you earn that income? How should one read that?
No, that excess to holding means you see that we already increased our CD ratio, 75%. We also increased our investments portfolio also. You can see that in the last 6 months. And this -- because we have excess SLR, by using that window, we are borrowing from the RBI, and we are effectively using that money to earn the funds, additional income.
The next question is from the line of Rishikesh.
Am I audible?
Yes, Rishikesh.
Yes, go ahead.
My question is with respect to the credit costs. Sir, how do you see credit costs for coming, let's say, 1 to 2 years? Could you please give some light over there?
No, actually, we are giving guidance of credit cost is 1.2, 1% that's 1.2. This now we are reached to that 1.10 to 1.22. Now we have already reached to 1.02. I don't see a drastic reduction on that. We may maintain around that.
Okay. And how would that shape up for FY...
Because there is a still scope for me to increase our PCR.
Okay. And how do you see that for FY '25 and FY '26, if you can share for that, too?
That's what I'm telling, we can manage around 1%. So till we reach our PCR is around 95%, that percentage now.
The next question, the last question from -- is from the line of Bharat Jain.
Sir, my question is on the slow pace of recovery on NCLT referred accounts. So if you have any comments about what is happening on those lines?
Mukherjee, sir?
Actually, let me tell you, you are all aware about the workings of NCLT. In spite of our best efforts, although some -- we are getting some fruits of NCLT processes but mostly by way of liquidation. That is number one. Number two, some of the cases are just at the verge of getting some results. So yes, the pace is very slow. But we still feel that NCLT has process, IBC has a process, has a deterrent factor which also helps us indirectly in recovery. So that way, it is pretty helpful.
Due to time constraints, this was the last question. Thank you, sir, for giving Antique Stock Broking, the opportunity for hosting this call. I will request MD sir for his closing comments.
Thank you. Thank you, sir. Thank you, investors. We are continuing whatever we told that whatever guidance we have given at the initial stages of this financial year. Hope you all realize that we are going -- moving in the same direction in a much better, stronger way, and we continue to do that. We will try see that our value of this bank is increasing multifold in the coming days. And whatever the hard work we are continuing in all the parameters, the same focus will continue. Thank you, sir. Thank you very much for your support.
Thank you, sir.