Canara Bank: Q2FY14 Results Analysis

Canara Bank has announced its Q2FY14 financial results, posting a net profit of Rs 625.94 crore for the quarter ended September 30, 2013, down 5.30% compared to that of Rs 660.97 crore for the corresponding quarter in the previous year. Its total income has increased by 13.30% to Rs 10427.48 crore from Rs 9203.61 crore for the quarter ended September 30, 2012.

As regards its operational performance, the bank posted a Net Interest Income of Rs 2191.16 crore, up 11.98 % YoY from Rs 1956.8 crore in Q2FY13. The NII for HIFY14 stands at Rs 4182.26 crore, up 10.05% on a yearly basis. The bank’s other income grew by 27.12% to touch Rs 773 crore in Q2FY14  from Rs 608.07 crore in Q2FY13.

Despite the growth in advances, the bank has managed to sustain its asset quality at the previous levels. For the September 2013 quarter, its Gross and Net NPAs stood at 2.64% and 2.3% respectively, as against 2.91% and 2.48% seen in the previous quarter. The Gross NPAs stood at Rs 7475.07 crore in the elapsed quarter as against Rs 7328.88 crore as on June 30, 2013. The provisions and contingencies declined 26.4% QoQ (up 60% YoY) to Rs 674 crore. The bank's Capital Adequacy Ratio (CAR), as per the Basel III norms, stood at 10.96% as on September 30, 2013, compared with 11.42% in the June 2013 quarter.

While PSU banks have been showing a depressed financial performance, Canara Bank has reported satisfactory numbers overall despite the current challenges and tightened liquidity throughout the quarter. On the day of the results announcement (November 12, 2013), its shares gained 1.80% to touch Rs 251.30. The provisions for rising NPAs were the largest contributors to the losses and may remain elevated for the next quarter. We advise investors to trade cautiously in the counter.