Canara Bank net profit rises 22% on healthy growth in other income

Canara Bank reports a 22% rise in Q1FY26 net profit, buoyed by a 32.73% YoY increase in other income, despite pressure on its net interest margin

State-owned Canara Bank reported a 22 per cent year-on-year (Y-o-Y) growth in net profit at ₹4,752 crore for the April-June quarter of 2025-26 (Q1FY26), aided by a rise in other income amid pressure on the net interest margin. 

 

Its net interest income (NII) fell 1.71 per cent Y-o-Y to ₹9,009 crore. Sequentially, the NII fell by around 5 per cent.  The net interest margin (NIM) from domestic operations declined to 2.55 per cent in Q1FY26 from 2.90 per cent in the same period last year.

 

“Despite some stress in net interest margin (NIM), we could show better results in terms of both operating and net profit owing to growth in fee based income and treasury income and in containing operating expenses,” K Satyanarayana Raju, managing director & chief executive officer (MD & CEO), Canara Bank, said. 

 

The bank’s other income, which includes fees, commissions and treasury earnings, expanded by 32.73 per cent Y-o-Y to ₹7,060 crore. Fee-based income and treasury income rose by 16.39 per cent and 296.22 per cent respectively.

 

Raju said that since 45 per cent of the total loan book is linked to the repo rate, the benefit of the rate cut was immediately passed on to the customers. The NIM was further impacted due to a cut of around 40-50 basis points (bps) in the marginal cost of lending rate, resulting in reduction in yield on advances by 36 bps.

 

However, deposit rates stayed elevated. The cost of deposit is expected to come down in the July-September quarter. Raju said the transmission of rate cut on the deposit front will happen fully from Q3FY26, and improvement in NIMs is likely to be seen then.  

 

The bank’s asset quality profile improved, with gross non-performing assets (NPAs) declining to 2.69 per cent as of June 30, 2025, down 142 bps from a year ago. Net NPAs declined to 0.63 per cent Y-o-Y. The provision coverage ratio (PCR), including write-offs, stood at 93.17 per cent on June 30. Sequentially, fresh slippages fell to ₹2,129 crore, from ₹2,655 crore a year ago.

 

Canara Bank’s global advances increased by 12.42 per cent Y-o-Y. Domestic credit grew 12.15 per cent Y-o-Y to ₹10 trillion. Retail advances and corporate loans registered Y-o-Y growth of 33.92 per cent and 9.23 per cent, respectively.

 

Credit demand is anticipated to pick up the pace during the festive season. Raju said that as the bank has already surpassed the credit guidance of 10-11 per cent for FY26 in Q1 itself, credit growth during festive season would be higher than the guidance. Looking ahead, the bank will maintain the credit growth around 12 per cent, he said.

 

The corporate loan book of the bank is expected to grow at 10 per cent on a yearly basis. “We want our RAM (retail, agri, and MSME) book to grow at 14-15 per cent so that the overall credit growth will be around 12 per cent. For corporate loans, we have already more than ₹30-35,000 crore sanction limits and in principle sanctions also we have given almost ₹20,000 crore,” Raju said.

 

Global deposits rose by 9.92 per cent to ₹14.6 trillion. Domestic deposits expanded by 8.74 per cent Y-o-Y to ₹13.38 trillion. The share of low-cost deposits — current account and savings account (Casa) — stood at 29.56 per cent as on June 30. Going ahead, the bank has given guidance of 9-10 per cent for FY26. 

 

The bank’s board has given approval to raise ₹3,500 crore via additional Tier-I bonds and ₹4,000 crore via Tier-II bonds in FY26. The bank will tap the market when pricing becomes favourable.

 

Additionally, Canara Bank’s two subsidiaries, Canara Robeco and Canara HSBC Life Insurance may get listed in FY26. Depending upon the approval from Securities and Exchange Board of India (Sebi), out of two entities, one may get listed by September and one by October.  

 

Previously, Canara Bank had withdrawn its decision to classify Anil Ambani’s Reliance Communications as fraudulent.Raju said that the case was withdrawn only to comply with the Rajesh Agarwal vs SBI case. “We are in the process of completing those exercises. Once those exercises of personal hearing are over, we will take an action based on the outcome of the same. There is no change in our stand for that account,” he said. 

 

Canara Bank shares closed 5.3 per cent higher at ₹113.50 on the BSE on Thursday.