Canara Bank Ltd

NSE:CANBK

Earnings Call Analysis

Canara Bank Reports Strong Growth Amidst Improved Loan Quality

Canara Bank delivered a strong Q2 FY '25 performance with a global business growth of 9.42%. Deposits and advances both grew approximately 9.34% and 9.53%, respectively. The net profit surged 11.31% year-on-year, exceeding INR 4,000 crores for the first time. Notably, gross NPAs improved to 3.73% from 4.14%, while net NPAs dropped to 0.99%. Earnings per share rose to INR 17.41, surpassing the guidance of INR 16.40. Retail credit growth was particularly significant at 31.27%, with housing loans reaching INR 1 lakh crore. The bank anticipates sustained credit growth of around 11% for the fiscal year.

Navigating through Growth Challenges

Canara Bank reported a global business growth of 9.42% for the quarter, totaling INR 23.59 lakh crores. This growth, while slightly below the projected 10%, reflects solid performance particularly in its advances segment, which grew by 9.53%. However, the bank faced challenges earlier in the year, having reduced low-yielding corporate advances by INR 30,000 to 35,000 crores, which contributed to a reduced growth of only around 1% in the first quarter. The second quarter has seen a turnaround with a nearly 4% growth in both advances and deposits, as well as a successful effort to enhance overall yields.

Impressive Profit Margins and Controlling NPA

The bank's net profit climbed 11.31% year-on-year, surpassing the crucial benchmark of INR 4,000 crores, hitting INR 4,014 crores. Gross non-performing assets (NPA) have improved significantly, declining from 4.14% to 3.73% year-on-year, while net NPA fell below 1% to 0.99%. The bank remains committed to further reducing NPAs, projecting a gross NPA of 3.5% by next March.

Strengthening Core Financial Metrics

Canara Bank also reported a capital adequacy ratio (CRAR) at a robust 16.57%. The provisions coverage ratio (PCR) reached a noteworthy 90.89%, reflecting the bank's commitment to managing assets prudently. Credit cost increased marginally from 0.9% to 0.97%, but remains well under the 1.10% guidance. Returns on equity (ROE) are particularly strong at 20.44%, surpassing an 18% target, while earnings per share (EPS) reached INR 17.41, exceeding the projected INR 16.40.

Sector-wise Highlights and Growth Potential

The retail, agriculture, and MSME segments demonstrated impressive growth, especially in the retail segment with a remarkable 31.27% growth rate. Home loans grew by 12.29%, while vehicle loans increased by 15.49%. The RAM sector overall, which combines retail, agriculture, and MSME lending, saw growth at 11.54%. The bank is optimistic about achieving an overall credit growth of 11% for the financial year, bolstered by retail operations and sustained demand in targeted sectors.

Operational Efficiency and Digital Transformation

Canara Bank has undertaken significant digitization initiatives, enabling faster loan processing and enhanced service delivery. The introduction of a new gold loan product in metropolitan areas has already seen a substantial contribution to the bank's retail portfolio, highlighting the importance of innovation within its growth strategy.

Guidance and Future Outlook

For the remainder of the fiscal year, Canara Bank remains optimistic about credit growth, projecting around 3.5% to 4% in the upcoming quarters. The bank is poised to maintain a strong trajectory in earnings and business growth as it continues to enhance its operational efficiency and manage its asset quality. Overall, it appears well-positioned to exceed its initial growth guidance and capitalize on opportunities within the Indian banking environment.

Earnings Call Transcript 2025-Q2

[Operator]

Good evening, everyone. We welcome you all to the 2Q FY '25 Earnings Web Call of Canara Bank. Thank you for giving us this opportunity to host the call today. Today with us, we have Mr. Satyanarayana Raju, MD and CEO; Mr. Debashish Mukherjee, Executive Director; Mr. Ashok Chandra, Executive Director; Mr. Hardeep Singh Ahluwalia, Executive Director; and Mr. Bhavendra Kumar, Executive Director; along with other senior members of the team.

Without any further ado, I hand over the call to MD, sir, for his opening remarks, post which we'll open the floor for question and answers.

[K. Raju, executive]

Good evening to all of you, sir. First of all, I wish you a happy Dhanteras for all the people participating in this interaction, sir. I'm presenting the September quarter results. So again, one more consistent quarterly results we are putting before you. Our global business has grown at 9.42% and stood at INR 23.59 lakh crores. Global deposit growth at 9.34% and stood at INR 13.47 lakh crores. Our global advances also has grown at 9.53% and stood at INR 10.11 lakh crores.

Our net profit has increased 11.31% year-on-year and first time it has crossed a quarterly net profit of INR 4,000 crores, stood at INR 4,014 crores. Our CRAR has reached an all-time high of 16.57% with a year-on-year increase of 37 basis points. Our PCR, first time, we have crossed 90% and stood at 90.89% with year-on-year increase of 216 basis points. Our gross NPA has come down below 4%. That is June quarter, it was 4.14%. Now it has come down to 3.73% with a year-on-year decline of 103 basis points. Our net NPA also has come down below 1% from the June level of 1.24%. It has come down to 0.99% with a year-on-year decline of more than 42 basis points.

Our -- this credit growth is led by the RAM sector, and our RAM credit has grown at 11.54%. If you see sequentially, our RAM credit growth in the current quarter itself is 4.5% and contributed by the retail credit grown at 31.27% and stood at INR 1.94 lakh crores. Our housing loan growing at 12.29% stood at INR 99,452 crores. But as on date, we already crossed INR 1 lakh crore in this housing loan portfolio. Our vehicle loan is also is growing at a good growth at 15.49% and stood at INR 18,607 crores. Our earnings per share, now this is against the INR 2 face value of the share. Our earnings per share stood at INR 17.41 with a year-on-year growth rate of 10.57%. Our fee-based income has shown a growth rate of year-on-year at 17.68% and stood at INR 2,436 crores. The first time we could touch that the slippage ratio at a bottom of 1% with an improvement of year-on-year 32 basis points.

These are all the some highlights of this. Just I want to compare our latest performance with the guidance given in the first quarter for this whole financial year. The whole financial year, we have given a guidance of business growth at 10% as against that, the 9.42%, we have grown up to September 30. That's the reason the main was the first quarter, of course, we shed our low-yielding advances in the corporate sector of INR 30,000 crores, INR 35,000 crores. That's why the first quarter growth was only around 1%. But the second quarter growth, we are almost -- advances has grown at near to 4% and the deposits also has grown at near to 3%. That has contributed this growth rate of business growth at 9.42%, advances growth at 9.53% and deposit growth at 9.34% as against the guidance of 9%.

The first time last 3 quarters, the CASA has shown an uptick. That's the growth compared to that sequentially the quarter-on-quarter. June quarter, it was only -- June quarter to now it has improved almost 28 basis points. That's 30.98% was there. Now it is 31.27%. And in absolute numbers also, quarter-on-quarter, we improved CASA of INR 8,000 crores. Our NIM slightly has come down compared to the peer banks. It has come down from 2.9% to 2.88%. Though there is a lot of pressure on the cost of deposit, but we could manage this because of our efficient management of our resources, alternative resources and efficiently lending at a little higher cost lending. These two, we could manage efficiently. That's the -- though the peer banks, their NIMs have been impacted from 7 to 10 to 11 basis points. We could manage with only 2 basis points reduction in the NIM.

Our gross NPA has come down from 4.14% to 3.73% as against our March -- next March level of guidance of 3.5%. Our net NPA, next March level guidance, we have given 1.10%, but already we are at below 1%, that is 0.99%. Our slippage ratio, we have given a guidance of 90% at the next March level, but we are already at touching the 91%, at 90.89%. Slippage ratio also, we have given a guidance of 1.3% for the March, but we already could successfully control that slippages, and we have touched that 1% slippage ratio. And our credit cost has slightly increased from quarter-on-quarter from 0.9% to 0.97%, but still it's much below the guidance what we have given at 1.10%.

This increase in the credit cost is from 0.9% to 0.97% is not because of any of the quality, this is -- we have provided additional more than INR 500 crores in existing NPA accounts to strengthen our PCR coverage ratio. That was the reason that the credit cost has shown a little higher side at the point compared to the previous quarter, but it is well below the guidance guidelines what we have given in the initial financial year. Our return on equity also is maintained well above that guidance of 18%, at 20.44%. And our earnings per share, what we have given the guidance is INR 16.40. And as against that INR 17.41, we could achieve it. Return on average assets, the guidance was the 1%, but we are able to maintain at 1.05%. It's sequentially last quarter also at 1.05%. Now also it is 1.05%.

But these are all the basic important parameters I want to share it with you. Sir, now it's open for all of you to raise any queries or clarifications. Along with me, all the EDs, 4 EDs are available. Our CFO is there. All the top brass is available here. Now it's open for you to ask any clarifications from our side, sir.

[Operator]

[Operator Instructions] We have our first question from the line of Mona Khetan.

[Mona Khetan, analyst]

Congratulations on a good quarter. Sir, firstly, on the growth bit. So if I look at the sequential growth, the retail book grew by about 12% Q-on-Q. So just wanted to understand where is this growth coming from? Because both -- if I look at both home loan and vehicle portfolios, which are bigger parts, they have only grown by 3% and larger part has come from other PL book as per Slide 29. So yes, where is this growth coming from?

[K. Raju, executive]

Yes, madam. Actually, we -- last time also I shared with you that in the current year, we have introduced a new product in the gold loan for metropolitan cities. Earlier in the metropolitan cities, our people who used to lend for the agriculture purpose for gold loans that we stopped that. In metropolitan, we are not lending for any agriculture purpose. We are lending only for that commercial purposes only with a little higher rate of interest. And we have introduced a customer-friendly product, tailor-made product for lending under the -- against the gold in the metropolitan cities. That has attracted a wide from all the metropolitan cities. It has contributed very good growth in that. That is helping in our retail growth much better.

[Mona Khetan, analyst]

So where does this gold book stand as on September?

[K. Raju, executive]

Yes, madam, actually, as on date, whole entire bank, our gold portfolio was INR 165,000 crores. This retail growth, what with the product what we launched is around INR 28,000 crores.

[Mona Khetan, analyst]

Okay. And this was about INR 19,000 crores last quarter, if I'm correct?

[K. Raju, executive]

Yes, madam.

[Mona Khetan, analyst]

Okay. And this other PL also includes education loan, if I'm correct. So how is...

[K. Raju, executive]

Yes, madam. Education loan also is there.

[Mona Khetan, analyst]

How large is that?

[K. Raju, executive]

Mortgage loans are also is there. Mortgage loans are also is there.

[Mona Khetan, analyst]

So how large are these books, education and mortgage loan, if you could share?

[K. Raju, executive]

Educational loan is almost it is INR 16,000 crores, madam. That is also growing at a double-digit growth.

[Mona Khetan, analyst]

Got it. Got it. And so mainly the growth is coming from this gold product introduced in metro cities?

[K. Raju, executive]

No, it's not that mainly, madam. Actually, that's a contribution. On an average, it is the RAM sector is growing at -- the retail other than the gold is growing at 3.5% because it is showing the 10% growth is that is because of the excess whatever it is there, it is because of that gold loan product.

[Mona Khetan, analyst]

Got it. And what would be the yield in this particular product, which is introduced in metro cities?

[K. Raju, executive]

It's 1-year MCLR, madam. Above 1-year MCLR, 10 basis points above the 1-year MCLR. That's on an average, we are getting 9.15% yield.

[Mona Khetan, analyst]

Secondly, if I look at the...

[Operator]

Madam, if you can please come back in the queue. We have other participants also.

We have a next question from the line of Mr. Rakesh Kumar. Mr. Rakesh Kumar?

We have a next question from the line of Mr. Nitesh. Mr. Nitesh?

The next question is from the line of Mr. Jai Mundhra.

[Jai Prakash Mundhra, analyst]

Sir, I just wanted to check on the SMA-2 number that has spiked. Last time you had mentioned that there is one central government steel exposure. Anything about...

[K. Raju, executive]

Yes, sir. Steel...

[Jai Prakash Mundhra, analyst]

I mean, anything about...

[K. Raju, executive]

No, no, carry on, carry on. You ask that question. Complete that question.

[Jai Prakash Mundhra, analyst]

No, no, so that is it. Sir, what is -- apart from the steel exposure, is there anything which is contributing to the rise in SMA-2?

[K. Raju, executive]

Yes, maybe one more. Actually, one more account is there, some -- 1 state government account, but it appears sometimes in SMA-2 and, again, it comes back to that SMA-0. That account as in September is reflected in the SMA-2. There the exposure also is a little comparatively high. These two have contributed 60% of that SMA-2.

[Jai Prakash Mundhra, analyst]

And what is the provisions that you hold on to the steel central government exposure?

[K. Raju, executive]

Already, we -- earlier also, I shared with you 15%, we already provided around INR 560 crores.

[Jai Prakash Mundhra, analyst]

Right. Okay. And the additional provision that you have provided, INR 500 crores is only on NPA, right? So that has increased the PCR?

[K. Raju, executive]

Yes, that is only on existing NPA, sir. That's INR 500 crores we have provided on existing NPA accounts.

[Jai Prakash Mundhra, analyst]

Correct. And sir, lastly, if you can also share the loan book by benchmark, how much is EBLR, how much is MCLR, and how much is fixed rate?

[K. Raju, executive]

Sir, our EBLR is 41%. Our MCLR is 48%. The rest is staff loans and fixed rates.

[Jai Prakash Mundhra, analyst]

Sir, agri also, agri, you have a decent chunk of agri and agri gold. That is also floating rate...

[K. Raju, executive]

No, actually, floating rate, it's linked to the MCLR, no. Retail and MSME is EBLR, remaining all portfolios are MCLR.

[Jai Prakash Mundhra, analyst]

Right. And last thing, sir, on your margins. So we have a decent contribution coming from -- apart from interest on loans and interest on investment, there is a decent proportion coming from the balance with RBI and ForEx transaction. How do you look at that going ahead and the overall NIM?

[K. Raju, executive]

So that's last continuously 5 quarters, if you look at that, so more or less, we are able to manage around INR 1,500 crores in that, INR 1,500 crores to INR 1,600 crores every quarter. The same tempo will continue. Because we have an 8% excess SLR, by pledging that, we can draw some money from the RBI at 6.5%, which we can lend it to that effectively overnight or any short-term duration. That is giving some benefit to us.

[Operator]

We have a next question from the line of Pritesh from DAM Capital.

[Pritesh Bumb, analyst]

Sir, one question on margins and yields. So we have been shedding the earlier loans, I think, about INR 2 lakh crores, INR 3 lakh crores were the loans, which we were shedding, which were lower interest rate, and that is reflecting in yields, but that is not reflecting in margins. So can you just give a little bit color on that? How will our margins move up from here? And how can it go beyond 3%?

[K. Raju, executive]

See, beyond 3% at this moment -- because you should understand first that our CASA ratio is 31%. When your CASA ratio is 31%, your cost of deposit compared to other peer banks will be a little higher side. Our cost of deposit is stabilized at 5.7% and when your cost of deposit is that much, yield on advances, earlier, I told you that it is around INR 60,000 crores was with the low-yielding advances. Out of that INR 35,000 crores to INR 40,000 crores, we already shed and we've withdrawn that sanctions, and we are taken it back that money. That has helped us in improving the June quarter to September quarter, if you see that yield on advances. It has increased from 8.66% to 8.77%. That means 11 basis points.

This INR 35,000 crores, what we have withdrawn from low-yielding advances and, again, deployed in higher-yielding advances, that has reflected in our yield on advances. If you see that only quarterly. June quarter to September quarter, cost of deposit is maintained at 5.7%. There is no deterioration there. But there is an improvement in the yield on advances from 8.66% to 8.77%. So that's what actually the earlier just 3 quarters back, our yield on advances, especially on the corporate sector used to be 7.12%. Now it has increased to 8.48%. That juggling what we are supposed to do, we have completed that. But it is not as you are expecting that it is INR 2 lakh crores to INR 3 lakh crores, it is INR 60,000 crores. Out of that INR 40,000 crores to INR 45,000 crores, we have done already. The remaining is well within our appetite.

And under the present -- one more thing I want to clarify this. Under the present conditions of tough high rate of interest for deposits, the cost of deposits -- controlling the cost of deposit is a little tough for the bankers. Under such circumstances, expecting a crossing of the NIM for 3% in the near quarters, 1, 2 quarters, it may not be possible.

[Pritesh Bumb, analyst]

So just a follow-up on that. Basically, our CD ratio is also in favor. We are at about overall 70%, and we are growing faster loan growth than deposit growth, but that is not reflecting in the margins. So where is the pressure coming from? I understand there will be pricing pressure in terms of the loan book side or the corporate loan book side, but we are also growing our retail book quite fast. So it does not seem to be that it is reflecting in the margin side. So just wanted to check.

[K. Raju, executive]

No, I hope if you have gone through that all the banks which have published their results, if you've seen their NIMs, every bank has lost their NIMs from minimum 7 basis points to almost 12 to 13 basis points. But in our bank, if you see that we lost only 2 basis points, that itself is a reflection that our credit, whatever the RAM is growing in, that is contributing to us. But again -- and let me clarify once again that our cost of deposits is comparatively higher than the other peer banks. The reason behind is our CASA is at 31%. That's why our focus more on the CASA.

We have initiated, we have almost launched more than 10 section-focused targets in the products we have launched for the last 20 months, and which has attracted very well from various sections of the society, and that has garnered almost INR 17,000 crores to INR 18,000 crores in the SB individuals. That is -- that's where our focus main. And we are also using alternative resources like infrastructure bonds or raising the window available with the RBI by pledging the excess SLRs. These things, we are also using it for keeping our cost of funds under control.

[Operator]

So we have next question from the chat box. Mr. Jai Mundhra has asked a question. How much is unsecured personal loan and GNPA in rupees crores and slippages during the quarter and recovery target for H2 FY '25?

[K. Raju, executive]

See, in our bank, the unsecured loans in the RAM sector, especially retail sector, is only approximately INR 18,000 crores. So out of that, it's pensioners and salaried class, where they get their salary or the pension through our bank, only those people will get the unsecured loans. Other than that we don't give any unsecured loans to any noncustomer or other than salaried class customer. That's why we don't see any stress in that, and it's only INR 12,000 crores. The remaining INR 6,000 crores is in unsecured loans under the educational loan. So that's anyhow that we are under control, so whatever it is there.

Under the slippages, in current slippages, if you look at that our entire retail, the NPA percentage is only just above the 1%. Our other personal loans, if you look at that, the percentage is only 0.52% NPA. And total overall current year, current quarter slippages, entire that slippages -- our retail portfolio is INR 194,000 crores, out of that slippages is only INR 440 crores.

[Operator]

We have our next question from the line of Omkar.

We have a next question from the chat box again. We have a question from Mona Khetan. What is the outstanding standard provisions on your balance sheet? How much of it is towards restructured book?

[K. Raju, executive]

The restructured book, I can tell that, that the provisions -- my standard provisions, my CFO will tell that. Our restructured book, RF1, RF2 and all together, now it is the INR 14,000 crores. Out of that, INR 4,500 crores under NPA; INR 9,500 crores is under standard asset. The standard asset -- against the standard asset, the provisioning, this particular September, we have provided INR 134 crores, but total outstanding, I'll ask my CFO to share with you. Whether we have the figure?

[S. Majumdar, executive]

Standard asset provision is around INR 2,000 crores for us.

[K. Raju, executive]

INR 2,000 crores for us.

[S. Majumdar, executive]

And anything else you require?

[K. Raju, executive]

No, no.

[S. Majumdar, executive]

Standard asset. That's all.

[Operator]

[Operator Instructions] We have our next question from the line of Mr. Pranav.

[Unknown Analyst]

Sir, credit growth has slowed down. Any outlook into the future? Will this come back and hopefully credit growth will pick up because of this?

[K. Raju, executive]

See, we -- initial years maybe we have given a credit growth of 10% guidance. But when I'm interacting with all of you, I told that it is a minimum credit growth, and we will do more than that, maybe 11% or 12%. In the first quarter, because of our stress on the margins and all, we have taken a call to withdraw that some sanctions at low-yielding advances that we have done some INR 35,000 crores to INR 40,000 crores, which has impacted the current year growth. But still, the current latest concluded September quarter, if you see that, the growth is almost -- credit growth is almost touching a 4%, 3.78% was the -- growth was there. That's a 4%.

The remaining 2 quarters also, we see the same type of growth because the September quarter comparatively is a slack season. But the December quarter and March quarter will be a peak season for credit growth. And we will see definitely a near to the 4% growth in these 2 quarters. So overall, definitely, what we committed that we may reach to that 11%, definitely, it may happen even after shedding that INR 35,000 crores low-yielding advances.

[Unknown Analyst]

Right, sir. Just one more question. In the SMA increase, it really happened because of the 2 accounts that you mentioned? That is one. And second, in your NII, what is the impact of that penal interest being classified as other income?

[K. Raju, executive]

No, it's -- hardly, it's every quarter, it will be around -- actually, you're asking about the interest recovered in the NPA accounts, no? Every year, every quarter...

[Unknown Analyst]

No, no, sir. No, sir. I'm saying that your NII is slightly down, so that impact is totally due to the...

[K. Raju, executive]

NII is slightly increased, INR 9,100 crores to INR 9,300 crores. It's not come down compared to June. June, it is -- NII is INR 9,166 crores. September, it is INR 9,315 crores. So there is a INR 150 crores increase is there in the NII.

[Operator]

We have a next question from the line of Ashlesh Sonje.

[Ashlesh Sonje, analyst]

Sir, firstly, can you give a breakup of slippages across segments?

[K. Raju, executive]

Slippage breakup is, total INR 2,300 crores. Out of that INR 1,000 crores is from MSME, INR 800 crores from agriculture, INR 500 crores from retail.

[Ashlesh Sonje, analyst]

Understood. Sir, second question, housing loan NPA has gone up by 20 basis points in this quarter. Anything to highlight over here?

[K. Raju, executive]

No. Actually, there is no such threat. Actually, earlier days, there was -- when one account is slipped, joint -- in some joint accounts, the top first name only, the accounts linked to the first name was system has allowed to slippage into the NPA. But the second name linked accounts was not slipped to NPA, which it has been pointed out in the audit that we have rectified it for onetime. We have allowed those such type of things all into the NPA. That's why there's a slight increase, it is showing that. Otherwise, there is no serious concern on that.

[Ashlesh Sonje, analyst]

Sorry, sir, I don't understand. What do you -- what is the first name and second name here?

[K. Raju, executive]

See, suppose if any joint borrower is there. Any joint borrower is there, so if any joint borrower is there, that account slipped to NPA. Both the borrowers' names, whatever the accounts are -- already other accounts are there, all those accounts are also to be slipped to NPA. But in our system somewhere that it has slipped only first name related accounts. Second name related accounts were not slipped. That has been pointed out by the auditor and it has been, for onetime, we have allowed that slippages and now we are recovering that.

[Ashlesh Sonje, analyst]

Understood, sir. Makes sense. Sir, SMA-2 account, the other account apart from the steel exposure, which you have, that other account seems to be about INR 2,000-odd crores. Can you just confirm that number and also give us some more detail about, which sector this is of?

[K. Raju, executive]

Yes, another account also is around INR 3,000 crores. Another account also is around INR 3,000 crores, but there is a state government guarantee is there. We don't see any too much concern on that account. And it has come down to SMA-1 as on date. It moves from various SMA-0 to 1, 2 like that.

[Ashlesh Sonje, analyst]

Understood, sir. And just lastly, what is the status of discussions on the steel exposure account, steel SMA-2 account?

[K. Raju, executive]

What is that?

[Unknown Executive]

Steel. RINL.

[K. Raju, executive]

RINL, that's steel exposure account. That's -- still that resolution work is going on. And as on date, this is a going concern. All banks are -- already consortium is formed. Earlier, this was under the multiple banking. Now to bring a uniform rules and regulations, a consortium is formed, and we are all working together and the management is also supporting us in bringing a resolution.

[Operator]

[Operator Instructions] We have our next question from Mr. Rakesh Kumar. What is the LCR now? And what is the reason for provisional write-backs in Others in the provision line?

[K. Raju, executive]

NPA. The NPA, there is a reduction from sequentially, if you look at that, our total NPI is around INR 5,900 crores. And last June, it was around INR 6,000-odd crores. It has come down slightly. And there is no further slippages in the NPA. The write-back is INR 72 crores.

[Operator]

And sir, what is the LCR now?

[K. Raju, executive]

Our LCR is 130.55%, that is 131%. And even the RBI new guidelines, if we implement it, it may impact around 10 to 11 basis points, so we will be comfortable at around 120%.

[Operator]

Sir, we have a next question from the line of Omkar. Corporate loan growth has been strong for PSU banks during this quarter. When will Canara Bank start picking up in this segment and which segment...

[K. Raju, executive]

No. This quarter, actually, the corporate credit growth has shown a 3% growth, 3% in the quarterly is almost annualized, if you do it, it's a 12% growth, which is above our guidance. So already in our bank, it has picked up. The first quarter also, we did that several sanctions and disbursement. But when we have shared that INR 35,000 crores of low-yielding advances, it has not reflected in the outstandings. But otherwise, credit growth is on average 3% every quarter, it is happening. And we are confident that the next 2 quarters also, it will happen at 3%.

[Operator]

We have our next question from the line of Mr. Shastri. Any update on the indicative time line for IPO of Canara Robeco AMC and other subsidiaries?

[K. Raju, executive]

As on date, it is scheduled in the fourth quarter, sir. Still we believe that it may happen in the fourth quarter only.

[Operator]

The next question is from the line of Mr. Rakesh Kumar. How does the economies of pledging SLR with RBI work, considering its impact on LCR and lower funding cost at 5.26%?

[K. Raju, executive]

So our CRO will tell. You tell.

[Uday Majumder, executive]

See, in respect of this impact of SLR-related changes, which RBI is contemplating, those who are borrowing heavily on a daily basis will not have much impact because they will be having the benefit of arbitrage. So others who are holding it only will be having an impact as far as LCR is concerned. Yes, our position is better because, as sir said, the changes has been brought in the new LCR guidelines for which the impact will be maximum 11%, so...

[K. Raju, executive]

11 basis points.

[Uday Majumder, executive]

11 basis points. Hope it is clarified.

[Operator]

We have our next question from Ashlesh Sonje. What is the outlook on recovery from bad loans in 2H FY '25? Any large resolutions expected?

[K. Raju, executive]

Large recovery, nowadays, the first 6 months, our recoveries mostly, we are getting it from small ticket size. NCLT resolutions are this quarter, total together, we got it around INR 569 crores. Out of that some accounts are from liquidation, but these are all not more than INR 100 crores each. It may be INR 50 crores, INR 60 crores. That is the range we are getting in each account. We are not getting like a INR 400 crores, INR 500 crores from one account. These are all from different accounts only. 50% of our recovery is coming from small ticket size. The remaining 50% only is these big tickets, but these big tickets also is not from single account. Various accounts, various resolutions are in different stages. During that process, some are in the OTA, some are in the liquidation, some are in the resolution approvals. These stages, we are receiving the money.

[Operator]

[Operator Instructions] We have a next question from the line of Mr. Ashlesh Sonje.

[Ashlesh Sonje, analyst]

Sir, just one last question. A few other banks have reported recoveries from the Reliance Capital account in this quarter. Any exposure, which you had? And what was the recovery amount from that?

[K. Raju, executive]

No, what -- we don't have anything. We got the money from another -- Reliance Infra account and not from that other account.

[Operator]

We have a next question from the line of Mr. Sushil Choksey.

[Sushil Choksey, analyst]

Congratulations to Team Canara for excellent results in stable environment. Sir, my first question is, what is your outlook on the second half balance between treasury and corporate and retail credit, as market is indicating that the treasury has peaked and MCLR rates also would have peaked. So do you anticipate that a lot of profit taking would happen, where treasury is concerned and a lot of credit growth because the yields have peaked and the demand on infra is going to be high?

[K. Raju, executive]

Sir, credit side, I'll speak. The treasury side, I'll ask my ED sir, to speak to you. But actually, credit side, there is a good growth is there, sir. We are seeing a traction also. The just concluded quarter, almost near to the 4% we could grow in the credit. In absolute number, domestic advances have grown INR 35,000 crores in 1 quarter. That's the range of growth what we are seeing it. And it is the same thing is continuing in the current quarter also and we believe that in the current quarter also, we may end up around 3.5% to 4% growth rate in the credit. So in the March quarter also, it may be likely to.

So with that, we believe that though the first quarter, we lost something because of shedding that low-yielding advances. But still overall, we believe that our credit growth may be around 11%. So that's -- and corporate at this 11%, but since the management has taken a call to reach that RAM sector at 58% and corporate is at 42%, so our credit growth focus will be more on the RAM sector. Even as on today also credit -- our total credit growth is 9.53%, but our RAM sector is 11.54%. So the RAM sector may grow a little faster than the corporate sector. Corporate may grow around 9% to 10%, but the RAM sector may continue to grow around 12%. And regarding the treasury, I'll ask Mukherjee sir, to explain to you.

[Debashish Mukherjee, executive]

Actually, our portfolio yield remains at 6.95%, and we expect it to continue. Now one opportunity, which we will get is that 5% HTM sale. That 5% HTM sale, we have not yet done. So that we have kept because yields are softening. So we would like to use that opportunity, which many of the banks have done it so far. So that will give us a lot of opportunity for profit making. So that way, we hope that our profits -- treasury profits will be maintained.

[K. Raju, executive]

That we are keeping it for the better pricing. Once we feel that softening of the yields may happen, then we may get a better pricing in this. That's why we have kept it pending, that 5% HTM sale, that we may exercise whenever the opportunity is good.

[Sushil Choksey, analyst]

It sounds prudent to what you are indicating on the treasury side? Sir, beside treasury, on the retail growth, do you anticipate with so much of technology spend and digitization, southern economy led by technology, a lot of manufacturing coming to your side of -- part of the country. Do you think the consumer demand at our end will be much higher than what is anticipated?

[K. Raju, executive]

No, definitely, I've seen a good traction in the even MSME, sir. A smaller manufacturing area also, we have seen that, in absolute numbers, we have grown in the first 6 months more than INR 6,000 crores to INR 7,000 crores. And even now the current 20 days also, we have seen that almost INR 2,000 crores to INR 2,500 crores more growth, we have seen that. So MSME also, we are expecting that the growth may be touching the near to that 9% to 10% this year. The last year, we were growing at 6.5%. Previous year, we have grown at only 2%. But this year, we are expecting that it may touch 9% to 10%. And retail growth will be definitely as a dominating contributor in RAM credit that will continue to grow around 14%, 13% to 14%.

[Sushil Choksey, analyst]

Sir, seeing your -- taking advantage on city loans where gold is concerned and many other things, any aspirational targets that the bank is setting up to garner this loan market?

[K. Raju, executive]

No. Actually, when the -- as a prudent banking, when we have stopped lending for agriculture purposes in metropolitan branches, we don't want to lose that business opportunity. That's why we have created a product suitable to the metropolitan citizens with a little higher margins, higher yields, and that has attracted very well in the field. And we have done the entire -- because in a daily, day-to-day basis, almost 40,000 to 60,000 number of accounts will open in the entire country, including agriculture or the retail number of gold loans, that we have digitized.

From October -- the September -- middle of the September onwards, we have digitized this entire process end-to-end. So that has helped us in meeting the customer requirements in a very faster mode. Nowadays, now we are giving the loans within the 10 to 15 minutes because entire process is digitized. Many things we can take control from a back end also like LTV ratio. Instead of depending on the branches, now we are centralized. We have minimized that -- we are trying to mitigate that risk, whatever is associated with the gold loan. With all these steps, we are already existing, we are growing at 15% to 16%, and we look at that the growth will be around 16% to 17% this year.

[Operator]

We have our next question from the line of Mr. Devvrath Mohta.

[Devvrath Mohta, analyst]

Congratulations on a good set of results. I just had one question. For the last 2 or 3 years, you all have consistently had recoveries greater than incremental slippages. But given that now we're entering a period where a lot of the large recoveries are behind us, do you think this will still continue? Or you think we go to a more normalized environment where slippages are higher than recoveries?

[K. Raju, executive]

No, I believe that it will continue because the reason is to clean the balance sheet, one is, our underwriting standards have been improved. Our underwriting standards have been improved, and that is helping in controlling the slippages. That is one side. The other side, recoveries is to have a cleaner balance sheet, we -- every quarter, we do some technical written-off also. That is adding to my kitty. And whatever we are recovering, that is again adding back to that kitty in the form of a written-off -- technical written-off. That will continue to support us. I believe that whatever we have shown in the last 1 year or 2 years, the same type of -- we are expecting that every year, the recovery in technical written-off is around INR 4,000 crores to INR 5000 crores. That's what actually last time also I shared with you, and that will continue to support our balance sheet.

[Operator]

[Operator Instructions] We have next question from the line of Mr. Rakesh Kumar. We have a next question from the line of Mr. Manish Shukla.

[Manish Shukla, analyst]

The new gold loan product that you're talking about, what is the nature of the customers -- what is the customer profile of the borrowers for taking these loans?

[K. Raju, executive]

What loans, sir? Gold loans, any individual, who is having a repaying capacity, if they are having gold with them, jewelry. So gold means we pledge only the jewelry. If somebody is there, that is the only criteria and their CIBIL should be acceptable and they should have a clear credit report. And they should have an account with us. For us, it's a mandatory. We don't disburse anything in the cash. All our gold loans are disbursed through only account, so he must be a customer. These are all the basic requirements.

[Manish Shukla, analyst]

And the earlier product that you have discontinued, you have said that it was agri gold loan in metro area?

[K. Raju, executive]

Yes, sir. Metro area because the agriculture gold loans that are to be in line with the regulator, that's a proof of land records and all is required. So we don't want to take any risk there. So that's why we discontinued that. We are confining that product only in the rural, semi-urban and urban areas where there is a possibility of proof of the holding the land and all we can obtain easily for lending. Metropolitan, that may not be possible. That's why we discontinued, but we didn't lose any business there. So whatever we -- earlier, it was lent under the agriculture. Entire thing has been converted into this retail. And rather, we are growing much faster than that.

[Manish Shukla, analyst]

And is there overlap in terms of customers who borrowed under the older product versus new product?

[K. Raju, executive]

That also may be there. Some overlapping will be there. Those customers because since we have stopped that funding under that, so they are forced to -- if they are eligible for that, they may have to raise that loans in this product.

[Manish Shukla, analyst]

Last question on this. Are you seeing a lot of balance transfer on this product because your rates might be very competitive in terms of lending rates for the gold loan?

[K. Raju, executive]

No, I don't see that. But actually, our -- we are almost out of 9,500, 7,000 branches are lending this gold loan. We are very much established in South India and pan-India also. If someone wants to raise the gold loan, they know that the Canara Bank is a better option because gold loan, generally, anybody will rise only on emergencies. Otherwise, no household will be interested to raise the loan against gold. Their sentiments will be there in the South India. Only in emergencies, they raise it. When they come to the bank on emergencies, how fast the bank lends that money. That gives you comfort. There, we have already streamlined the processes and we established. All these things, we don't do any separate campaigns and all. It's walk-in clients only will be there.

[Manish Shukla, analyst]

Okay. Last question, and sorry if you've already answered it. What's the credit cost guidance for this year, full year '25?

[K. Raju, executive]

See, actually, we have given guidance of 1.10%. And we are now -- as against that 0.97% we achieved. I think we will be below 1%.

[Manish Shukla, analyst]

And does that assume any further provision on the government accounts?

[K. Raju, executive]

That's what, wherever it is required, we are providing that additional -- by taking that only, this is -- otherwise, we would have been around 0.9%. Because we want to strengthen our balance sheet, we want to provide additionally to improve our provision coverage ratio. That's why I'm telling you that we will be below 1%.

[Operator]

We have a next question from the line of Mr. Ashok Ajmera.

[Ashok Ajmera, analyst]

Sir, I just wanted to have your views on the corporate loan book. When the -- there is an overall slowdown on the total credit side and also, of course, the deposit side also, what are your views on strengthening or increasing the corporate book? Are you getting some inquiries? And are there some projects in the pipeline, in the sanctions so that we can grow our overall credit book a little faster?

And secondly, you have always been of the view that you want to -- you are interested in a direct lending and not through the co-lending. That's been your stand in the past. Are you changing that stand and going for some co-lending tie-up so as to increase the book?

[K. Raju, executive]

So first, let me speak on the corporate credit growth, sir. Actually, corporate growth is actual in terms, it is happening at double digit only in all banks also, in our bank also. Because of cost of funds is very high, no bank wants to continue to lend at a cheaper rate, which they were lending it quite a long time. So every bank is withdrawing that type of sanctions. So only when they are withdrawing that, it is not reflecting that it is reflecting finally that the slow growth is there. But actually, I didn't see that any slow growth in demand or the disbursement in the corporate sector. So on an average, every quarter, 3% easily can be achieved with that, and we see that traction. Since the low-yielding advances, every bank is cautious about their NIMs, every bank is cautious about their margins.

They are not lending to this low-cost, low-yielding advances to institutes or central PSUs, whatever you call it as. That's why it is looking that. Otherwise, private investment and all, whatever we are seeing that the tractions are there. Infrastructure, maybe there is a good traction is there. Manufacturing sector, in certain infrastructure-related manufacturing sectors, there is a good traction is there. Data center creation, maybe good traction is there. In our bank also, we have almost sanctioned, but pending for disbursement is more than INR 20,000 crores is there. We already -- as on date from October, September 30 to now, we have grown more than absolute number by INR 5,000 crores. That itself is reflecting that there is a good demand is there on that. The second one, you have spoken on...

[Ashok Ajmera, analyst]

The co-lending type.

[K. Raju, executive]

Co-lending model. Sir, co-lending model since beginning, initially, we were very slow in the co-lending model because unless otherwise, we have an end-to-end digital platform, we don't want to lend on the co-lending because we don't want to make it a mess by maintaining the manually. Now we have onboarded that co-lending platform. We are one of the initial banks that we have onboarded excellent platform on the digitally. But only thing we have almost tie up with the 8 to 10 such NBFCs to co-lend. But the problem is they expect us to dilute from our credit policy and match with their sanctioning policies, which we are not so keen to dilute our policy.

If any NBFC comes forward and refer to that to any portfolio, which matches with our existing credit policy, underwriting standards, we don't mind to do that. Otherwise, we want to confine ourselves to our policy. We don't want to deviate from our policy, sir.

[Ashok Ajmera, analyst]

What is the book size on that, sir?

[K. Raju, executive]

Very miniscule, sir. It is only INR 320 crores.

[Ashok Ajmera, analyst]

Yes, that's what I thought. But going forward, you see some flip in that.

[K. Raju, executive]

Again, it's the same thing I want to repeat it that we are ready with the platform, but the only thing that we don't want to compromise on our underwriting standards. If any NBFC can match with that we are ready to coordinate with them.

[Ashok Ajmera, analyst]

Sir, my last question in this round, sir, is on the treasury side. Sir, now with the indication of rates getting softening here in India also, how do we -- I mean, what is the composition of our treasury book and how ready we are to book some good profits in the AFS book? And though this will go to the reserve, but on the trading profit side also, how our treasury is performing? And what is the view going forward in the remaining 2 quarters of the FY '25, sir?

[K. Raju, executive]

Our ED, Mukherjee, sir, will reply that, sir.

[Debashish Mukherjee, executive]

Actually, our HTM portfolio is around 80%. So we have kept it at that. And our portfolio yield right now is 6.90%. We are maintaining that over the last 2 quarters. Now unlike other banks, we have not shed 5% of our HTM, which we are entitled. So we will use that amount for our profits because yields are softening. So over the -- this quarter or the next, wherever we find opportune time, we will sell that. And then we will maintain our treasury profits in the same line as it was in this quarter.

[Operator]

We'll take that as the last question. Thank you, Canara Bank for giving Antique Stock Broking this opportunity. We hand over the call to MD sir, for his closing remarks. Over to you, sir.

[K. Raju, executive]

Thank you. Thank you, one and all, sir. Once again, I wish you a happy Dhanteras and Deepawali for all the investors and all the participants, sir. Thank you once again.

[Operator]

Thank you, everyone. This concludes the earnings call for Canara Bank.