Canara Bank Ltd

NSE:CANBK

Earnings Call Analysis

Canara Bank Posts Strong Q3 Performance

Canara Bank's story this quarter is marked by robust growth and improved financial health. The bank's net profit surged past last year's total, reaching INR 10,797 crores in just nine months, a narrative of significant profitability. They reported strong business expansion, with global operations growing by 9.87% to INR 22,13,000 crores, and domestic advances increasing by 12.56%. Notably, there was remarkable growth in their RAM sector (retail, agriculture, MSME), climbing by 14.56%. The bank improved its asset quality, with gross NPAs dropping to 4.39%, a sign of a healthier loan portfolio. Earnings per share rose notably by 45.74% year-on-year to INR 79.21, signaling increased shareholder value.

Sustaining Growth Amidst Economic Headwinds

The company is maintaining its global business growth at a steady 10%, with a slight outperformance in advanced growth, which is currently at 11.69% but is expected to be maintained around 12%. Despite challenges, the company has been able to manage its deposit growth, recording an 8.55% increase, which aligns with business growth. However, the Current Account Savings Account (CASA) ratio is a notable concern as it has only grown by 5.05%, failing to reach the ambitious 35% target and instead only achieving 31.65%. The company is actively addressing this issue by launching focused campaigns to boost retail term deposits and CASA.

Strategic Provisions and Recovery Efforts

To address workforce retirement benefits, the company has provided an additional INR 700 crores, influenced by a recent settlement and auditor's recommendations. This includes a shortfall adjustment of about INR 450 crores and approximately INR 250 crores anticipated for future quarters, with the expectation of much less than that to follow. The bank strives to recover from a pool of written-off accounts, totaling INR 69,000 crores, with INR 52,000 crores in ongoing National Company Law Tribunal (NCLT) cases. Efforts include streamlining recovery operations, such as offering settlements through One Time Settlement schemes with varying recoveries, some even at 100% of the value.

Corporate Sector Lending and Future Credit Growth

The bank set a target of 10% growth in large corporate lending and is confident in achieving this due to an 8.69% growth rate as of December, even with a reduced exposure to Non-Banking Financial Companies (NBFCs) following increased risk weights. The company has reduced its NBFC exposure by INR 8,000 crores. The reduced exposure is compensated by strong demands from sectors like infrastructure and green energy. The bank is cautiously optimistic about its future credit growth, with a year-on-year growth rate of 11.69% and aims to maintain it around 12%.

Net Interest Margin (NIM) and Cost of Funds

There has been a marginal quarter-on-quarter increase in the cost of funds. Nonetheless, the bank is determined to keep the Net Interest Margin (NIM) close to 3%, as it faces industry-wide pressure. The bank's NIM is currently between 2.9% and 3.0% and this resilience is essential to sustaining profitability amid rising fund costs.

Technological Advancements and Digital Initiatives

Significant investments in digital infrastructure have shown promising results, with a remarkable increase in Unified Payments Interface (UPI) transactions from a yearly INR 98 crores to a monthly INR 83 crores. The bank has also been a pioneer in interoperable Central Bank Digital Currency (CBDC) transactions. Initiatives are underway to launch a mobile app for corporate clients, and a data analytics center to optimize lead generation efforts, hoping to increase contribution from lead conversions from the current 8% to 12% to a target of 20% to 25%. Other ventures include a global hackathon focused on AI and machine learning, with over 250 submissions promising future innovation. Notably, the bank's API services have expanded from 35 to 135 APIs. The overarching goal is to supplement human efforts with technology, further improving business outcomes without substituting the critical role that employees play.

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon, everyone. On behalf of Antique Stock Broking Limited, we welcome you all to 3Q FY '24 Post-earnings Conference Call of Canara Bank Limited. From the bank side, we have -- from the management team, we have 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, Executive Director. Without further ado, 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.

[K. Raju, executive]

Good afternoon to all of you. I'm here to share some few performance highlights of the December quarter of Canara Bank. Our net profit has increased and reached to INR 3,656 crores. We request to all of you to mute your mics. This time we have crossed the 5 digit figure. The net profit last year, net profit was INR 10,604 crores. But in the first -- this current financial year in the first 3 quarters itself for 9 months, we could surpass that last entire year's, the net profit of INR 10,000 crores. Now the current 9 months net profit is INR 10,797 crores. This could be possible because of our net interest... Shall I continue, sir?

[Operator]

Yes, sir, please continue.

[K. Raju, executive]

Our global business has crossed the INR 22,00,000 crores and reached the 22,13,000 crores within a 9.87% year-on-year growth. Our domestic advances are growing at 12.56% our total global advances have crossed INR 9,50,000 crores. Our total PCR has improved 269 basis points and stood at 89.01% and the return on asset, we are continuing to maintain above 1%. The current quarter also return on asset is at 1.01% with an improvement of 25 basis points year-on-year. First time, our credit cost has gone below 1%. Now our credit cost is at 0.97% with a year-on-year decline of 24 basis points within a healthy portfolio and improvement in the recoveries in the NPAs and the written off accounts. Our gross NPA has come down to 4.39% as against our guidelines of 4.50% for the entire financial year with a decline of 150 basis points year-on-year.

Our net NPA also has further down to 1.32% year-on-year decline of 64 basis points. This global business under the global advances what we achieved INR 9,50,000 crores is led by RAM sector as we have given the guidance that we focus more on the RAM sector. Our RAM sector has grown at 14.56% and stood at INR 530,000 crores. This was led by retail credit growth of 12.14% Agriculture and Allied Activities, including the gold loan, 19.26%. MSME first time for the last 3, 4 years, we are touching almost 10% year-on-year growth. And within the retail credit also, the major growth is in the housing loan and the vehicle loan at 12.07% and 13.22%. Our earning per share is improved 45.74% year-on-year and reach you to the INR 79.21.

Our return on equity still we are maintaining at 21.95% with a year-on-year improvement of 357 basis points. Our net interest margin though there is a stress on the cost of deposits, still we are able to maintain above 3%. Our net interest margin is at 3.02%. We initially itself is, we have given a guidance that we are focusing more on high yielding advances like in a RAM sector, more focus will be given on the RAM sector. Accordingly, just 1 year back, our RAM sector was at 54% and corporate was at 46% because of the higher growth rates shown in the RAM sector, our RAM sector composition has become 56% and corporate has reduced to 44% but more or less, every parameter is growing in the double digit, near to the double digit, including the corporate also has grown year-on-year at 8.26%. You can see this, the ratios specific ratios, net profit is continuously increasing. And the PCR also is increasing from 86.3% to 89.01%.

Gross NPA also is continuously reducing from 5.89% to 4.39%. And net NPA also is coming down gradually from 1.96% to 1.32%. Certain key ratios, I wish to share with you that this reflects the consistency and the stability of the balance sheet of the Canara Bank. Return on asset above 1%, that's both quarterly as well as cumulative is 1.01%. Return on net worth, so quarterly at 21.06% and cumulative, it is 21.95%. Cost-to-income ratio quarterly 50.37% but cumulated to 45.93%. But here, I would like to clarify itself -- hear itself, that why the cost of cost-to-income ratio for the quarter is 50.37%. There is not much increase in the operating expenses.

But you are aware that the current quarter, the bipartite settlement has been signed between the Employee Association and the IBA. They signed the agreement at a 17% incremental growth in the wages, and it is effective from the November 2022. That means up to December 2023. It's a total 14 months. When we have started our journey from the November 2022, initial first quarter, we have provided in the anticipation of incremental growth in the salary bill.

We have provided 10%. There afterwards the 2 quarters, we have provided 15%, 15% because the last time the wage revision was happened in between the 14% to 15%. But now the settlement has happened at 17%, which demanded a higher provision. So up to December 31, 2023. That means a total entire 14 months period. We calculated the burden on the employee cost because of this wage revision at 17%. And the entire amount, whatever it is up to the December 31 to the gap we have provided in this quarter itself.

In addition to this, because of this wage revision, there will be an actuaries on the retirement benefits also. Out of that also INR 250 crores we have provided in this quarter itself. So totally, in addition that regular provision of 15% to 17%. INR 700 crores extra, we have provided towards the staff meeting the requirements of the staff wage revision impact so that there will not be any much pressure on the next 2 quarters on this particular issue.

The entire that expenditure, whatever it is in actual we have calculated it and the entire amount has been provided in this quarter itself. That's the reason the cost to benefit income -- Cost-to-income ratio has shown a little more in the 50% in the current quarter. But overall cumulative is 45.93%. We have given a guidance at 45%. We are sure that by March, we will maintain that at 45% and below. Our CD ratio is just above the 75%, 75.26% our EPS earnings per share is at current quarter, it is 80.17 and cumulative, it is 79.21. Our book value is further improved INR 390.78 and our NIM is maintained about 3%. So that's our capital funds here. Again, I want to clarify that last -- continuously 3 quarters, we are able to maintain about 16%. But because in the December quarter, the regulator has changed the risk weight is on certain NBFC exposures and the personnel loans exposures of all the banking industry.

That has affected -- impacted the Canara Bank's capital in a downward 52 basis points. But because of our internal accruals in the current quarter also, after meeting the current quarter advances growth, we could have a surplus of 10 basis points. That's why the net impact for us, though it is initially because of the higher risk weightage, it was impacted 52 basis, but it has reflected finally at the end of the quarter is only 42 basis points. That is 16.20 became a 15.78. And of course, here, let me clarify to you that the Board has already approved the bank to go to the market for raising AT1 Tier 2 bonds to the extent of INR 7,500 crores. Out of that AT1bonds is INR 3,500 crores and the tire 2 bonds is INR 4,000 crores. In the just concluded quarter, we have gone to the market for INR 1,000 crores, raising INR 1,000 crores, AT1 bonds, keeping in mind the rate of interest at 8.4%.

So we got biddings at 8.4%, almost to the extent of INR 1,443 crores. At the entire INR 1,443 crores has been observed. The remaining INR 6,100 crores is to raise from the market. We are watching the market because we are very rate sensitive and rate concerned about that rate of interest, that whenever we feel that it is favorable to us, definitely, we'll raise this with the remaining INR 6,100 crores in the next 2 months if the market favors to us.

And this is actually guidelines at the initial financial year of -- that's given the guidance to the analyst as well as the media, sir. And actuals, what we have given is, we have given the business growth globally at 10%. We are maintaining that 10%. Advanced growth, we have given at 10.5%, but we are growing at 11.69%. We are sure that we maintain that to 12%, whatever it is the growth rate is there. deposit, we have given a guidance of 8.5. We are growing at 8.55.

CASA is on the area of concern still for us, though we have given ambitious 35% but we are able to maintain only 31.65%. This is because though the deposits are growing at 8.55. Our CASA year-on-year, it has grown only 5.05. It's not in sync with the total deposits. That's also one reason that we are not able to reach that CASA 35%. But this current quarter, we have taken it as exclusive campaign for the deposits, especially in the retail term deposits and main focus on the CASA. We have initiated several initiatives. We are hopeful that this current year, year-on-year growth, it will also in sync with that our deposit growth of 8.55%. And gross NPA as against 4.5%, we already achieved 4.39%. Net NPA, as against guidance of 1.2%, we already achieved 1.32%. This year, we have given 90% as a guidance. We already achieved 89.01%. Slippage ratio. This is another area to show the reflect or to reflect the health of the portfolio.

As against 1.30%, we achieved 1.24%. Credit cost, first time that it is also helping indirectly in our NIM also. That's 1.20% as against that the first time in the Canara Bank history that we could achieve the credit cost below 1%, that is at 0.97%. Our return on equity as against the guidance of 19.50%, we achieved 21.95%. Earnings per share, we have given a guidance of INR 65, but whereas against that INR 79.21 what we have given, the results have come that why we could achieve that, the INR 79.21. Return on average assets, another strong ratio, which we are able to maintain as given the guidance is 1% for the next to financial -- this coming financial year end, but we could achieve it well before that, and we are able to maintain at 1.01%. These are all the few highlights of the performance of the December quarter from our side, sir.

Now it's open. You can ask any questions. We are all along with me our Executive Directors and CFO, are all available. We are ready to answer your queries, whatever it is there, sir, or the clarifications.

[Operator]

[Operator Instructions] So first, I would first request Mahrukh to ask the question.

[Mahrukh Adajania, analyst]

So my first question was on the interest income. If you see other interest that has gone up a lot. That has gone nearly by INR 800 crores, the other interest in the total interest income. So what does that comprise of, what items does it comprise of?

[K. Raju, executive]

These are all the actuary items, madam. It is related to the income on reverse repo income, whatever the interest we keep it for the overnight, we lend to the other partners in the market because when we have a tool of borrowing from the RBI at a cheaper rate, we have a scope to invest wherever the liquidity issues are there with the other partners, there we can lend overnight or in a short-term basis. These are all the things. And of course, some other is their interest and swap. Many times, whenever the swap-interest rates will be there, that income also will be there. Some interest on tax also will be there. These are all the components of that madam.

[Mahrukh Adajania, analyst]

So sir, can you quantify the swap income and tax income so that we know how to forecast this for future because it's gone up very sharply by INR 800 crores, so that way.

[K. Raju, executive]

That's correct madam, but you can see that there is a steady growth for the last 4 quarters. So I hope you might have seen that continuously that quarter-on-quarter, there is a growth. That means you can understand that we are focused on that particular parameter, and we are working on that. That's why these results are giving that. But exactly the -- item wise, I don't have the clarification, but we'll come back to you, madam on that.

[Mahrukh Adajania, analyst]

Okay. But just, sir, if you could give the tax refund, if not the swap how much is there?

[K. Raju, executive]

Our CFO, will be in touch with you, Madam.

[Mahrukh Adajania, analyst]

Sir, and my other question is that now what is the earlier you had indicated in the previous calls that at the 15% high, your wage bill per month was around INR 115 crores. Now that you have provided 17%, what does that move up to?

[K. Raju, executive]

Madam, actually already now it has been -- a settlement has been happened. Final draft guidelines, they are adopting it, but the agreement has been happened between the employees unions and IBA at 17% load on the 2022 November 1, to salary bill. Based on that, we are providing it at 17%. If we calculate it every month, it is calculating around INR 129 crores, approximately INR 130 crores per month. So we calculated from last 14 months on the same basis, INR 129 crores. And whatever the shortfall we have provided earlier with 15% is offset. Whatever the shortfall is there. The entire amount we have observed in this quarter itself up to December 31 madam. That's why we have provided INR 700 crores extra in this quarter for employee towards the employee.

[Mahrukh Adajania, analyst]

Correct, sir. And sir, you mentioned that the INR 250 crore of actuarial pensions. What is the -- so that is up to December, you provided up to December?

[K. Raju, executive]

Actuaries see is up to March madam. So up to March, that is whatever it is there in that majority we already provided in the actuaries. A small portion may be there that we will grow in the March. Very small portion will be left out in the actuaries. In actuary is also a majority portion we already observed in this quarter itself.

[Mahrukh Adajania, analyst]

Okay. So now in the March quarter, most likely, you will just see a provision of INR 130 crores into 3 and very small pension.

[K. Raju, executive]

Very small portion of actuaries. Very small portion of actuaries.

[Operator]

We have the next question from the line of Mona Khetan.

[Mona Khetan, analyst]

My first question is on the provisions line. So we see a write-back of about INR 490 crores during the quarter. What does this pertain to?

[K. Raju, executive]

Actually, madam, you might be aware about that RF1 and RF2. When we do that, we have provided because of the restructuring, some provisions have been made. That when it is coming to that accounts have been completed, the tenure required tenure as well as accounts are now standard assets for that. And it is -- whatever it is there on those things -- whenever the loans also closed in this, that reversal of this provisioning on RF 1 and RF 2, is the major to INR 490 crores madam, whatever it is there.

[Mona Khetan, analyst]

Okay. So this mainly pertains to restructured book coming off, et cetera?

[K. Raju, executive]

That's what this is. Delayed RP also is there madam and the resolution processes there. Now wherever delayed RP, we have provided extra provisions once that has been admitted in the NCLT that the provision also will be reversed.

[Mona Khetan, analyst]

Sure. And where does the residual restructured book stand today against about INR 14,000 crores last quarter?

[K. Raju, executive]

Yes, madam. It is there actually, originally, this RF1 and RF2 and MSME restructuring was happened INR 24,000 crores. As on date, it has come down to the INR 17,000 crores. And out of that, almost INR 4,900 crores is NPA and INR 12,000 crores is standard asset.

[Mona Khetan, analyst]

Okay. Sure. And my second question is on the recoveries. So we have seen very strong recoveries over the last 2 quarters from written off accounts. So what sort of expectations you have for the coming quarters in the next fiscal as well.

[K. Raju, executive]

The current financial year, in the initial status itself, we have told you we informed to the analysts that our target is -- our slippages will be well within our recoveries towards the NPA and the written off and the upgradation. On the same guidance, we are continuing in that we are able to maintain for last continuously 3 quarters. And the December quarter also, we could maintain that the recoveries, again, the underwritten of -- it is coming not only from the NCLT. NCLT we got only INR 450 crores odd amount through liquidation or the settlements, resolution through. The remaining all is through small loan accounts, madam, wherever OTS, some OTS is there. Every time we have an attractive OTS schemes are there in written-off accounts.

And that go through OTS and across the 10,000 outlets, we get this recovery. And we have because focused on that recovery, especially we are driving in all the areas. So we are getting a better recoveries under written-off account. And the slippages also, you can see that year-on-year, it is slowly -- continuously, it's coming down quarter-on-quarter. If you look at that, the precious slippages, if you look at that. So December, it was INR 3,000 crores, thereafter was INR 2,857 crores. September, it is INR 2,894 crores. Now it is INR 2,697 crores. These are on the fresh slippages madam. We are also controlling our fresh slippages on this INR 2,697 crores. The slippages are INR 1,200 crores towards MSME, INR 1,000 crores is towards agriculture and INR 400 crores is towards the retailer.

[Mona Khetan, analyst]

Sure. Sir, can you just repeat the breakup of slippages?

[K. Raju, executive]

INR 1,200 crores from MSME, INR 1,000 crores from agriculture, INR 400 crores from retail.

[Mona Khetan, analyst]

Okay. And nothing from corporate?

[K. Raju, executive]

Small amounts from exiting loans and other small accounts.

[Operator]

We have the next question from the line of Rakesh Kumar.

[Rakesh Kumar, analyst]

So sir, first question was pertaining to this wage revision provision that we have made incrementally in this quarter. So we understand that there was an increase in the settlement number at 17%, and we were making provision at around 15%. But like the rise -- the incremental rise in this quarter, like we have made around INR 740 crores approximately. Correct me if I'm wrong.

[K. Raju, executive]

Yes, I'll explain to you that in that. Actually, these are already -- so last year, December quarter, then March quarter, June quarter, September quarter. There are 4 quarters have been completed. In the first 2 quarter, we have provided 10% and thereafter, we started providing at 15% in anticipation that it will be in line with the last time settlement. But this time, settlement has happened for 17%. So how to calculate 17% from 14 months and we calculated that 14 months. When we calculated whatever the shortfall, the shortfall, it has come around INR 450 crores.

That INR 450 crores, in addition to that regularly, what the agreement was we are supposed to provide INR 129 crores per month. That is for these 3 months also has been provided in addition to that, that INR 450 crores also has been provided. In addition to that, that the actuary is what the -- towards the retirement benefits.

Some burden will be there around INR 400 crores or INR 450 crores. There also, we have taken some INR 250 crores in this quarter because in this quarter, we felt that some cushion is there for us. So we absorbed this in this quarter itself that these 2 together. So total INR 700 crores, we have provided additionally that has impacted that OP as well as the cost-to-income ratio, sir.

[Rakesh Kumar, analyst]

Previously, we were not making provision on account of actuarial benefits obligation.

[K. Raju, executive]

No, but generally, actuary is the payment will be -- once we have finalized it only actuaries can be -- you can arrive what is actually amount. But since the settlement is not finalized, that will happen only at the time of payment. But now this is also this time also, because in anticipation of next 2 quarter, it has to be paid since we have a cushion in this quarter, we have taken some burden this quarter in advance. Generally, the tendency practice is at the time of payment only actuaries will reflect in that quarter.

[Rakesh Kumar, analyst]

Okay. Understood, sir. And sir, on the [ rig ], written-off pool still is around, close to around INR 69,000 crores. And so firstly, what is the -- if you can give some picture on this INR 69,000 crores written-off pool. So what is the vintage of this pool? Like so these are 2 years old, 3 years old? So if you can categorize that number by...

[K. Raju, executive]

I can tell you that broadly, I can tell that, but the majority will be in already NCLT cases. More than INR 51,000 crores, INR 52,000 crores, is in the NCLT cases. The remaining is in the RAM sector various areas. So where you have already D3 where you have provided 100% or the loss asset where there is no security. On those matters only this pool is there. So some efforts, what we are continuing in the NCLT, that is also giving the results. But these remaining INR 14,000 crores to INR 15,000 crores base is available other than NCLT cases. There we have an attract to OTS system, and we have streamlined our machinery to focus more on that like conducting within the bank adalat , we are very going to the villages for conducting a village sabhas and all to encourage them avail these benefits. So these are all actually, we have provided 100%. Even whatever the money we get, it is a profit for us. That focus we have taken as a main focus, that's why we are getting a better results in that.

[Rakesh Kumar, analyst]

Very nice. So just one last question. What is the haircut that we take in the OTS scheme, sir?

[K. Raju, executive]

No, sir, actually, haircut is the NCLT, it will be decided by the NCLT because based on the resolution process as well as otherwise, it is on the liquidation. Whatever it is there. It is a [indiscernible], a secured creators a decision there, we have to follow according to that. In normal cases, depending on the size of the account or the securities available, there is a Board-approved policies are there written off. Only to that extent, the written-off will be there. And the written off means sacrifice will be there. In smaller actually book values, sacrifice will be less.

[Rakesh Kumar, analyst]

Okay. Roughly around maybe what number?

[K. Raju, executive]

You cannot justify that to the exactly [Foreign Language]. But generally, small values book values, whatever is there, you can expect 80% to -- 75% to 80% in that book value. But where is the NCLT, that may not be the case.

[Rakesh Kumar, analyst]

NCLT number, we are aware of, sir, but on the OTS scheme, I think we are not fully aware of.

[K. Raju, executive]

Then in some cases, you will get 100% value. In some cases, where it is a loss, there is no security and it's very old NPA. We may accept it even 75% of the book value.

[Operator]

We have the next question from the line of Bhavik Shah.

[Bhavik Shah, analyst]

Sir, I just wanted to understand, so on the interest income, the other line, which is 14 million, sir, how should we think about it? Like going forward, is this sustainable? Like what are the levers, if it can be sustained or you cannot just...

[K. Raju, executive]

What we want to tell you is just look at the last 4 quarters, how it is gradually showing that. But I don't think that here further increment -- increase -- improvement will be there because we already reached to the optimum level. And presently, market funds are very tight. We cannot generate so much funds to effectively use that. So here afterwards, again, further improvement showing in that other income may be very difficult.

[Bhavik Shah, analyst]

Okay. So on a steady-state basis, like should we assume the INR 400 crores, INR 500 crores there?

[K. Raju, executive]

Pardon?

[Bhavik Shah, analyst]

On a steady-state basis, this move INR 400 crores around.

[K. Raju, executive]

reduction?

[Bhavik Shah, analyst]

No, no. What I'm asking is that the current number is INR 1,400 crores. On a steady-state basis, how should one think about this number?

[K. Raju, executive]

No, it is all -- predicting is too early. It's a demand and supply. If the demand is high, we get higher income. So if the demand is not there, we may not get that income. So very difficult to predict that.

[Bhavik Shah, analyst]

Understood, sir. And sir, what will be the LCR this quarter?

[K. Raju, executive]

Pardon? LCR is 135%, sir. 135.01%.

[Bhavik Shah, analyst]

Good luck.

[K. Raju, executive]

That's why we are comfortable. That's why we are able to earn that money.

[Operator]

The next question we have from the line of Ashok Ajmera.

[Ashok Ajmera, analyst]

Congratulations, Raju sir, and the entire team for a very good set of numbers because if you take away with this additional provisions of -- on the employee increase in the employees cost, then the profit would have been phenomenal in this. And considering that, shall we consider that from the next quarter, the employee cost will come down as against INR 4,533 crores to around INR 4,200 crores?

[K. Raju, executive]

Sure, sir, definitely.

[Ashok Ajmera, analyst]

So that will add to the further profit of the bank. Sir, one small data point, maybe because of certain entries are there, our net worth, which is shown in the results, just to have a small testing that net worth in September was INR 67,480 crores. If you add this profit of INR 3,656 crore, it becomes INR 71,136 crores.

[K. Raju, executive]

Net worth capital.

[Ashok Ajmera, analyst]

Net worth shown is INR 70,893 crores. So there is a difference of reduction in net worth of INR 243 crores.

[K. Raju, executive]

That is because that -- no, let me say to you, sir, that's actually when it has come for that the expiry of the bonds, whatever it is there. Where this -- you can see that in the INR 71,000 crores to INR 74,000 crores common equity, what we have shown. You're talking from the presentation, sir, or you are talking from any other areas?...

[Ashok Ajmera, analyst]

Your results in net results net worth INR 70,893 crores. But if you plainly add the profit of this quarter to the last time net were shown, and there is a difference of INR 243 crores. So as you say, that equity I mean, the bond value erosion of INR 243 crores.

[K. Raju, executive]

No, sir. No bond value erosion will not be there. But only you are asking about net worth some expired bonds will be paid might have been paid. That might be one case. And when you are taking it in account for internal accruals we don't add the entire net profit to that. We keep a 20%, 21% to do the proposed dividend that also we keep aside. We don't add entire thing. That might be the root cause for that, sir.

[Ashok Ajmera, analyst]

All right. I mean point taken, will take further. Sir, now coming on this credit growth, you have given 10.5% of the target for the entire credit. If you look at up to December, it's around 7.09% of the credit growth. So does it mean that in the coming quarter, that is January, March quarter, we will have about INR 40,000 crores of increase in our overall credit book?

[K. Raju, executive]

Generally, that is the tendency, sir, March generally, you will find more. Look at the year-on-year growth, whatever it is there. Now also, it is reflecting almost 11.69%. And that easily we can manage that 11.69% or around 12%, sir. The year-on-year for the current quarter -- current year also.

[Ashok Ajmera, analyst]

Yes. Current year also, it's around 10.5% to 11%.

[K. Raju, executive]

11.5% to 12% we can...

[Ashok Ajmera, analyst]

That's good. Sir, we were talking about that recovery from the written-off account because it has become very attractive for every bank because it just plainly, it gets added to the bottom line. So what is our overall cumulative book of the written-off amount.

[K. Raju, executive]

Just now my friend from another analyst has also has discussed about this around INR 69,000 crores, whatever the books are. Out of that INR 52,000 crores is the NCLT book. The remaining is from the RAM sector, sir. RAM other than NCLT sector.

[Ashok Ajmera, analyst]

That is INR 14,000 crores something.

[K. Raju, executive]

No, INR 52,000 crores in that, the remaining is whatever it is INR 14,000 crores is from other than NCLT accounts.

[Ashok Ajmera, analyst]

All right. Sir, on the...

[Operator]

Ajmera ji, we'll request you to please join back in the queue as there are more participants in the line. Next question would be from the line of Jai Mundhra.

[Jai Prakash Mundhra, analyst]

Congratulations on 1% ROA. I have a few questions. First, this actuarial hit that we have taken of around INR 250 crores the residual.

[K. Raju, executive]

INR 250 crores.

[Jai Prakash Mundhra, analyst]

It that could come yes, yes INR 250 crores we have taken what is the residual, sir? Is it like less than INR 250 crores or it could be a much higher number?

[K. Raju, executive]

It will be less than INR 250 crores, sir. Much less than INR 250 crores, sir.

[Jai Prakash Mundhra, analyst]

Understood. Okay. And sir, secondly, in terms of your loan growth, right? So especially in the large corporate segment, we see that the NBFC exposure has gone down which is probably due to this demand supply thing. But what is your sense in the total corporate growth only, only the last quarter.

[K. Raju, executive]

So large corporate growth, what we have targeted is 10%, sir. We are sure that, that will happen because in the first 9 months, if you see that as on December 31, we could achieve 8.69% even you can see that without increasing any exposure in the NBFC. NBFC exposure has come down drastically almost INR 8,000 crores from last quarter to this quarter. The reason behind is when the regulator has increased the risk weight on certain NBFCs as a corporate goal, we have taken corporate call. We have taken a call that, that part of that burden has to be passed on to our existing NBFCs who are enjoying a concessional rate of interest. Wherever they are accepted on negotiations is the increment, that's an increase in that rate of interest. We have continued that exposure where 1 or 2 cases that it has not happened.

There is no mutual agreement between us and the party. We have received back that money, sir. We have asked them to repay it, and they have repaid it. So it's not that there is no demand. There is a huge demand for NBFC for funding, but we are very much -- cost consciousness is there, yield consciousness is there. So unless we don't want to compromise at the cost of bottom line to show a growth at the top line. That's why we have taken, but even without this NBFC exposures.

But now there are so many applications that are pending with us for even NBFC by paying the money, whatever we are demanding it. But there is a huge demand is there from infrastructure, green energy and even steel power and even data center creation, several other manufacturing setups also it is there. Use already we are sanctioned and pending for the dispersal also is there. And several proposals are also there on pipeline also. So we are very much confident that the 10% corporate growth will be there.

[Jai Prakash Mundhra, analyst]

Then, sir, what about next year? I mean if you have any ballpark numbers, should it remain stable or do you see any signs of this accelerating to like 15%, 20%.

[K. Raju, executive]

No, we feel that this stable growth will continue next financial year also. But since as a Canara Bank, we have taken a call that we want to grow more faster in the RAM sector than the corporate sector. because we don't want to grow a balance sheet at the cost of bottom line. So current year, whatever we are projecting the same here and 1% or 2% here and there may reflect in the next financial year also.

[Jai Prakash Mundhra, analyst]

And sir, if you can share your split of the book by benchmark? How much is EBLR, how much is NCLR and if it's...

[K. Raju, executive]

NCLR is around 51%, sir. And RLLR is around 39%. The remaining is all remaining fixed rate will be there, staff will be there and the old base rate and all will be there, sir. Majorly 90% is covered with RLLR and NCLR. NCLR is 51%.

[Jai Prakash Mundhra, analyst]

Correct. And sir, if you can share the broad trends in passing on the NCLR. So let's say, the card rate from 1 year back book, which comes to a repricing in let's say January this year. the card rate will be anywhere...

[K. Raju, executive]

No, the NCLR changes and ongoing every month, we keep on. We changed that because of based around our cost of the deposits. Even the just concluded this month, first week also, we increased 5 basis points. 1 or 2 months back also, we have seen that 5 basis points, we increased. It depends on that. But it's not that once you are increased, it will be implemented for entire 51%. For affecting that it takes minimum 12 months to impact that entire portfolio. But still, we feel that some 25 basis points difference is still to be collected from around 15% of that -- 15% to 20% still the portfolio to be passed down to this.

[Jai Prakash Mundhra, analyst]

So sir, your yield on advances, so do not stagnate, right? Is that what you're saying that the yield on overall advances should still rise by whatever the pace that you intend to...

[K. Raju, executive]

The major concern here is the yield on advances cannot be stagnant, sir, it keep increasing it till the market is -- the rate -- higher rate of interest regime is there. Because it is our cost of MCLR will be defined based on our cost of funds. Since January 1 onwards, we are experiencing that a much more higher rate of interest on the deposits. So naturally, that will impact on our coming months MCLR proportionately. It will never be constant, sir. It's totally dependent on our raw material of deposits cost.

[Jai Prakash Mundhra, analyst]

Okay. And sir, on your LDR, you mentioned that we have around 75% LDR. Do you think that from now onwards, you can have loan growth growing at a faster pace than deposit? Or now you have to have balancing.

[K. Raju, executive]

Now because the 3 years back or 2 years back, our CD ratio was around 67% to 68%. So we were losing so much money on the interest income. That we felt that we can go up to the 77%, 78%, but we have reached 75%, but we don't want to neglect the liability growth. That's why we thought that the current quarter, we want to take it, this particular specific quarter growth, we want to match both the deposits also we want to grow at the rate the advances are growing, maybe 3% or 3.5%, whatever it is there. Whatever we are expecting in the advances, the same percentage we want to grow in the deposit also. Special campaigns have started for the deposit mobilization.

[Jai Prakash Mundhra, analyst]

Question is slightly longer term. I mean, 12 months basis. Could you still see an uptick in your LDR issue? Or you think 75% is more or less the peak?

[K. Raju, executive]

No, there is no hard and fast rule that we should restrict ourself at 75%, but it's in our guidance. Guidance means it's an advisory that it's a healthy maintenance of balance sheet at 75% to 77% in healthy maintenance of the CD ratio. We want to be in that bracket only.

[Jai Prakash Mundhra, analyst]

Sure. Sir, and last 2 clarifications, sir.

[Operator]

Jai we would request you to please come back. Next question is from the line of Kunal Shah.

[Kunal Shah, analyst]

So firstly, maybe in notes to accounts, what we give with respect to this wage revision overall provisioning of INR 1,816 crores so that includes pension as well or that doesn't include pensions?

[K. Raju, executive]

No, no, no. INR 250 crores is extra, sir. INR 1,816 crores plus INR 250 crores. It's INR 2,066 crores.

[Kunal Shah, analyst]

Yes. So I was just looking at it. So maybe last quarter, this INR 1,816 crores was INR 1,070 crores and now it's becoming INR 1,816 crores So actually, the increase towards the wage revision would have been INR 730 crores. And over and above that, there would be another INR 250-odd crores of actuary [indiscernible] .

[K. Raju, executive]

again, you should -- you please recall that every quarter, we are providing INR 345 crores. This we are maintaining for last 3 quarters onwards, 15% at 15%, INR 115 crores per month, INR 345 crores. This INR 700 crores is over and above INR 345 crores.

[Kunal Shah, analyst]

Okay. So what you're trying to say in which way is this INR 345 crores was due over and above...

[K. Raju, executive]

Over the last quarter also, we have provided INR 345 crores. So this time, you INR 345 is in line with the last quarter. But over and above again, we have provided INR 700 crores.

[Kunal Shah, analyst]

Okay. Because last time when we look at it INR 1,073 crores and if they would have provided for 11 months, that would have about [indiscernible] .

[K. Raju, executive]

You have to deduct this INR 300 crores no. If you get this INR 340 crores, automatically, you get INR 450 crores only approximately. That's the same amount you will get.

[Kunal Shah, analyst]

Got it. Okay. And this NBFC, you have highlighted that there has been maybe some repayments. But how much we would have tried to pass it on in terms of increasing the rates to the NBFC post the risk weight increase?

[K. Raju, executive]

See, you can't pass it on everybody on the same pricing. It is a negotiated term, sir. If it is a triple-A, we might have passed it on to 10 to 25 basis points for double-A, a little more on that, on the A, it may be a little more. It varies from their risk weight is on dollar. But it's a party-to-party negotiating system, what the relations they are maintaining with us, what other ancillary business we are enjoying with them, all these factors will be a part of our decision-making?

[Kunal Shah, analyst]

But for triple-A rated [indiscernible], how much would that be around about 10, 15 basis points or it would be 30, 40 basis point?

[K. Raju, executive]

Sure, it will be more than 15 basis points, I can say confidently.

[Kunal Shah, analyst]

Okay, more than 15 basis points. Okay. And lastly, in terms of branch expansion, so we see some branches getting added after a long time. So maybe how we are looking at it in terms of expansion of the network because generally, we are not seeing this transparency [indiscernible].

[K. Raju, executive]

So if you look at that outlets branch network that increase in the number itself will reflect that there is opening of new branches are there. So though the some closer also branches are there, but opening up branch are there 2 branches are there. I think already 140, 150 branches we have opened newly. And the remaining also will be completed in this quarter.

[Kunal Shah, analyst]

Okay. So the only question was we will continue to do that but how would that be?

[K. Raju, executive]

Yes, depending on the business opportunities.

[Operator]

Next question is from the line of Rahail Shah.

[Unknown Analyst]

Sir, 2 questions. This EPS the run rate we've been at EPS. So what is your outlook there now? Can we sustain this per quarter.

[K. Raju, executive]

Sure, sure, sure. We can sustain that.

[Unknown Analyst]

Okay. So quarter 4, we can expect the 20?

[K. Raju, executive]

Whatever we are reflected in the December quarter, definitely, that will sustain. That much I can tell you that.

[Unknown Analyst]

All right. And cost of funds quarter-on-quarter has slightly moved up. Do you see any pressure on NIMs?

[K. Raju, executive]

Sure, sir. There is a pressure. Last time also I shared with you actually, we are expecting that our NIM will be around between 2.9% to 3.0%. But we are trying our best to manage at a possible extent so that we maintain near to 3%.

[Unknown Analyst]

Okay, nearer to 3%.

[Operator]

The next question is from the line of Pritesh from DAM Capital.

[Pritesh Bumb, analyst]

Sir, just one clarification needed. When you give breakup of slippages corporate, you said it is very negligible. But some -- last month back, there was a report that BGR has been as a refund. And there, your exposure is about 5.6 billion. So was it taken earlier? Is it going to be taken next quarter? What is the stance there?

[K. Raju, executive]

No. Actually, for our bank, what I can comment only on our bank, our bank slippages are very much under control because if you look at that one slide, we have given it on stressed assets. If you see that SME 1 and 2, the entire INR 5 crore and above if you take, it is only 0.63. And if you take entire portfolio, including the INR 10,000 loan also, even then it is less than 3%. So I don't see that, that problem will be there in our bank. That's why we are telling that our slippage is only gradually quarter-on-quarter, we are seeing a downward trend because we are able to maintain when it is in the SME 1 and 2 itself, we are addressing those accounts. It's only because of our monitoring system, we have tightened.

[Pritesh Bumb, analyst]

No, I appreciate it, sir. I see that the whole systems NPAs are quite -- I mean, the asset quality is quite strong. But why we are asking this, is that it was noted that it is as per divergent support of RBI. And so one was under the impression that it was a business in [indiscernible] .

[K. Raju, executive]

That's what I'm telling. I can comment only on the Canara Bank side. Canara Bank divergence, nothing is there in that aspect. It may be because based on the industry, they might have commented, but for a Canara Bank, I can comment on that based on our figure, sir.

[Pritesh Bumb, analyst]

Got it. Second, sir, this quarter, we had a slightly higher write-offs, than the trade. What is your view on write-off going ahead? We had INR 3,900 crores write-off this quarter.

[K. Raju, executive]

So, that's a write-off when you have already provided 100% in day 3 and the last asset. Depending on your balance sheet comfort, you can keep doing that, but our call is to the extent what we are recovering towards the written-off fund, the NPA and the upgradation, we don't want to do beyond too much on that. We want to restrict ourselves nearer to that. The second one is this write-off. Majority of this write-off is for NCLT cases, when you are getting something then you are forced to do the write-off balance amount. You can't keep in your books just like that.

[Operator]

The next question is from the line of Sushil Choksey.

[Sushil Choksey, analyst]

Congratulation to Canara Bank team for stable positive performance. [Foreign Language]. First question is, you've declared that you will monetize some of your subsidiaries. Do we expect something in current year or roll over into next year?

[K. Raju, executive]

No this investment may happen in '25, sir.

[Sushil Choksey, analyst]

Okay. And are you -- as per your plan, you'll do 2 businesses or 1?

[K. Raju, executive]

2, sir. -- so 1 already our board has, approval has come, and we are informed to that SBI and the market also, sir. Second one, also, it is in the process. Once our board has approved that also we will disclose to the market, sir.

[Sushil Choksey, analyst]

Second thing, sir, we've taken lots of initiative for digitization, a lot of developments where products are concerned, I'm sure I've seen a lot of features which have been, are you accelerating your spend on digitization further or the current program is fine. And when do we see the actual results of the entire process within the next 12 months or a year later?

[K. Raju, executive]

Now already, whatever the 2 years back with decision initiatives we have taken. We are getting some results on that. Let me share some figures to you, sir. Just 3 years back, our UPI transactions in per annum is around INR 98 crores, sir. But now we have reached to the position that per month, it is INR 83 crores. That's the jump we have seen in our -- this is because of our initiatives, what we have taken for the last 2 years. We are onboarding the people. Our ai1 has gotten attention of many of the people -- many people are joining in the -- as a UPI initiatives and all. But simultaneously, the first time we have come out with the CBDC interoperability. We are the fast banker. Many such initiatives we have taken.

But now one more thing is what the mobile app, we got a very good feedback from our customers. So many demands have come from our corporate clients also that they also need in addition to that net banking through laptop and Hull. They expected that mobile app also should be available to corporates that we are launching recently, and that is also has attracted many people's attention on our clients. Then recently, also, you might have gone through that newspapers and all in the first day of this current calendar year, January 1, we have inaugurated a center of excellence for data and analytics, DnA. And along with that, data lake also we have inaugurated those things. These data analytics, what we are working for the last 2 years is on a small scale, but initially, we thought that first let us clean our existing data so that make your data as genuine as possible so that you get the better results when you use the tools.

That's why we work the last 2 years strongly on the existing legacy data by using the dump data analytics. And now we got the confidence that yes, we are cleaned that data to the maximum extent. Now if we start using this with the latest AI and the machine learning models, tools available in the market, if you can use and you can generate a business and support your outlets for garnering the -- when you are aiming for more than 10% growth, definitely, you need a support to the branch channel also to supplement that business growth. This initiative is helping us. And what we have taken that initiative is contributing in the last 9 months period, I can tell you that through these analytics, what the leads we generated based on their expenditure behavior studying for the last 5 years and 10 years.

We are generating in several products like a savings bank, current account, MSME, housing loan, vehicle loan, personal loan, pension loans like this and almost 8% to 12% of incremental growth, whatever the growth we are showing that last 9 months, out of that 8% to 12% growth we are converting from this lead generation side that itself is a major contribution. So this we want slowly increase it to 20% to 25%. For that, we are adopting new tools. And the tools what we are latest is implementing is, we are creating a data bank for each outlet within their 2 or 3 kilometers operation. The data bank contains how many business units are there, how many schools are there, how many government offices are there? How many societies are there and -- and this entire data, we are making it available to the branches so that they can straightforward, go and meet those people and convert them into that.

Such type of uses, we have started implementing it and many such tools are there. Recently, you also might have seen that on the 1st of January, we had a final of hack-a-thon what we conducted the last 3 months. And there was an overwhelming response from the globally. There are 2,899 applications. restation have happened. More than 250 people have submitted their ideas. The ideas also, we have given a 3 topics. One is using AI and machine learning in customer experience, default prediction and fraud prevention. And we got excellent response from the younger generation, IITians, many IITians have participated. And all these ideas are available for us. And now we are working more and more on that. And this -- whatever we are -- we already started enjoying the results.

So it doesn't mean that we stop here. We are continuing to move forward. And of course, we are also very soon, we are going to launch even self-help groups end-to-end STP process in sync with our RBI innovation hub. That is also product is completed, UIT is completed. We are ready to launch that. Several initiatives like that, we are taking our API banking, we have strengthened. Though we started with the 35 services, now we extended to almost 135 APIs, we have made it live. Like that everything we are doing it this continue that the innovations in the IT will continue. But at the same time, we don't want to just invest and leave it. We are very periodically, we created such a setup of that return on investment on these IT is a core focus point for us, and we are focusing on that, sir.

[Sushil Choksey, analyst]

Sir, Canara Bank is always willing to learn, and that is going to be your future. Sir, how much are we likely to spend to enhance our human resource with these technology abilities which you're creating?

[K. Raju, executive]

The shorts are actually business lead conversion. I already told that it is incremental growth so far, it is contributing around 10%. But we are aim to improve it to around 20% to 25%. So that, that will supplement it to the staff.

[Sushil Choksey, analyst]

Sir, my question was, you have created the technology, you've created a data set we are empowering the branches. But technology can do certain things. How are you empowering the human resource who will do all the jobs, how are you...

[K. Raju, executive]

That's what, sir, again, let me explain to you, sir. So our human resources, 84,000 of human resources is our strength. Technology is a supplement to their efforts. I don't think that this technology is a substitute for the human resources. For banking sector, it is a service, selling the services is mainly human beings, sir. We never undermined our efforts -- our talent of internal things. I can say that many of these technology initiatives is in-house. So we have created that pool and they are doing that.

Now by using these initiatives by all the 84,000, how it is possible, we have created even virtual classes by using the metaverse and that has been imported to our training institutes. There is every employee will be trying at least a minimum 1 or 1 to 3 days in every new initiatives of this technological initiatives. That is helping them, making them more useful. Even CBDC, CBDC now we have given on the entire our entire 84,000 people have been onboarded on the CBDC. Our staff benefits are being created through CBDC. So we are making them familiar with our initiatives so that they can easily use these initiatives and do better to this bank.

[Sushil Choksey, analyst]

Sir, my last question, your outlook on international business...

[Operator]

We'll take that as the last question. Thank you, sir. Due to time constraints, that would be our last question. Thank you sir, for giving us the opportunity -- giving Antique Stock Broking the opportunity for this call. We would like to hand over the call to you for closing remarks.

[K. Raju, executive]

Thank you very much. International business also, we are continuing to do that. We have 3 outlets. We got license from Gift City for the fourth branch, which is going to be launched very soon. And we -- with the opening of the Gift City branch, I'm sure that globally, whatever the corporate lending we can do, we can do from this here only with the limited regulations. And I'm sure that will help in our -- increasing our both bottom line as well as the top line. And we keep continuing to do this. And thank you very much. Our main focus is consistency. That is, I'm sure that it is reflecting in our quarter-on-quarter results.

[Sushil Choksey, analyst]

Sir, congratulations and best wishes for 2024.

[K. Raju, executive]

Thank you, sir. Thank you.