Canara Bank Q2 Profit Rises 8% to Rs 5,175 Crore as Lower Provisions Lift Shares Nearly 5%

Canara Bank shares climbed close to 5% on Wednesday afternoon after the state-run lender reported a September-quarter profit that rose for a third straight quarter, helped by stronger lending income and a smaller bill for bad loans.

The Bengaluru-headquartered bank earned a standalone net profit of Rs 5,175 crore in the July-September quarter, up 8.4% from Rs 4,774 crore in the same period last year. The stock touched an intraday high of about Rs 126.40 against Tuesday's close of Rs 120.20, taking the lender's market capitalisation to roughly Rs 1.14 lakh crore.

Core income did the heavy lifting

The headline profit growth understates how strongly the bank's main business performed. Net interest income, the gap between what the bank earns on loans and pays on deposits, rose about 20% to Rs 11,005 crore from Rs 9,141 crore a year earlier.

That pace is notable for a public sector bank at a time when lenders across the system are dealing with tighter liquidity and rising deposit costs. It came alongside rapid balance sheet growth: gross global advances rose 19.46% year on year to about Rs 13.75 lakh crore, while global deposits grew 13.13% to nearly Rs 16.97 lakh crore. Total global business, deposits and advances combined, crossed Rs 30.72 lakh crore, up 15.88%.

On the domestic book, advances grew 16.95% to about Rs 12.65 lakh crore and deposits rose 10.79% to roughly Rs 15.48 lakh crore. Loans growing faster than deposits will keep attention on how the bank funds future growth, but for this quarter it translated directly into higher interest income.

A smaller bill for bad loans

The second driver was provisioning. Canara Bank set aside Rs 1,339 crore for non-performing assets in the quarter, down from Rs 1,504 crore a year ago. Total provisions came in at Rs 3,583 crore.

The bank also said its net NPA ratio improved for the 23rd consecutive quarter, a long streak that reflects years of clean-up since the stressed-asset cycle of the late 2010s. Its provision coverage ratio, which measures how much of its bad loans are already covered by set-aside funds, rose to 95.34% at the end of September from 94.76% in June and 93.59% a year earlier. A coverage ratio that high leaves the bank with a thin residual exposure to its existing stressed book.

Why the market cared

State-run bank stocks had a weak start to Wednesday, with the PSU bank pack slipping in morning trade while IT shares carried the indices, and peer Bank of Baroda fell over an unrelated legal claim. Against that backdrop, Canara's numbers offered investors a cleaner story: double-digit loan growth, faster interest income, and falling credit costs at the same time.

The caveat is that much of the bottom-line gain came from lower provisions rather than operating leverage alone. If credit costs normalise, profit growth would depend more heavily on the bank sustaining its 20% NII expansion, which will be harder if deposit growth continues to trail lending.

What to watch next

Investors will look for detail on net interest margin trends, the share of low-cost current and savings account deposits, and any guidance on credit growth for the second half of the financial year. With the Reserve Bank of India having raised the repo rate earlier this month, the effect of higher rates on both loan yields and funding costs will be a key theme for public sector banks in the December quarter. Borrowers watching how loan rates move can model the impact on their own repayments with our EMI calculator.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.