metro india news  I new delhi

State-owned Canara Bank announced its third-quarter results for FY26, posting a significant 25-26% year-on-year increase in standalone net profit to Rs 5,155 crore. The strong bottom-line growth was largely driven by a one-off gain of approximately Rs  1,900-2,000 crore from the partial stake sales in its subsidiaries Canara HSBC Life Insurance and Canara Robeco Asset Management Company following their recent IPOs and listings. Net interest income (NII), the bank's core lending revenue, remained nearly flat year-on-year at around Rs 9,252 crore, showing only a modest 1% rise. On a sequential basis, NII was also stable. Pre-provision operating profit (PPOP) surged about 18% year-on-year, benefiting from the exceptional gains. However, when excluding these one-off items, core PPOP declined by around 8%, falling short of market expectations.

Provisions during the quarter were in line or slightly lower, contributing to the healthy profit growth. Asset quality showed positive trends, with improved slippages and declining credit costs. The return on assets (ROA) stood at approximately 1.16%, surpassing the bank's own guidance of 1.05% for the period—though analysts noted this was bolstered by the one-time gains. Despite these positives, concerns emerged over the bank's net interest margins (NIM), which contracted by about 5 basis points sequentially to around 2.45-2.50%.

This came after management had previously indicated in the prior quarter's call that margins had bottomed out and were unlikely to decline further. The continued pressure on NIMs, amid broader interest rate dynamics, raised questions about core profitability sustainability. The results prompted a sharp reaction in the stock market. Canara Bank's shares, which had seen a strong rally in recent days, came under pressure and declined significantly following the announcement—falling up to 5% or more on the day—as investors focused on the miss in core earnings and ongoing margin compression rather than the headline profit figure.

In an interview with a private news channel, the bank’s CEO and MD noted that the bank's net interest margin (NIM) has faced pressure from recent rate cuts. With 49% of the advances portfolio linked to repo rates, the full benefit of the 125 basis points cut during the financial year has been passed on to borrowers immediately, while deposit costs have only declined by 8 basis points. This asymmetry contributed to a decline in yields on advances by 45 basis points over the period. The nine-month NIM stands at 2.50%, and the current level is around 2.45%.He guided that margins should remain range-bound between 2.45% and 2.50%, even if additional easing happens due to lower CPI inflation (now at 2% against earlier expectations of 2.6%).