CANBK — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Canara Bank · Mr. Debashish Mukherjee
Mr. Debashish Mukherjee
Executive Director, Canara Bank · Management
Ms. A.
Manimekhalai
Mr. K Satyanarayana Raju
Mr. Brij Mohan Sharma
Mr. L V Prabhakar · Managing Director & Chief Executive Officer,
Right, so if I just go just by the guidance given by you, 10% or 8, 9 percent growth in credit and 10 basis points increase in NIM, which will account to somewhere around 13 to 14 percent including NII and obviously other income, that you are saying and obviously taking operating expenses, your guidance for profit and EPS looks very, very conservative.
I think it can be 30, 40 percent higher.
Am I wrong in this conclusion, because 1.4% of NPA provision is going to be around 10 thousand crores max and if I just tail in all the other data that you have guided and in this 40 EPS looks very conservative? Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Sir, this is our minimum benchmark which will always be conservative and going forward, as we declare June results, we will be revising the forecasts also sir.
Guidance will be revising on upper side.
Perfect, so that’s tax amount for the year, 30% will continue? Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Sir, as long as it is beneficial to us, till some more quarters, we will continue with that.
Once the carry forward losses are adjusted, then we will actually take a call to shift to the new tax regime.
Right, right, any guidance about how many quarters will that continue? Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Only going forward, I will be in a position to say sir.
As of now, I think it is difficult for me.
Perfect, perfect and just to repeat, last question from my side. Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Please, please. Mr. Pranav: Yeah, out of 1000 crores, in Future exposure, 200 crores payment we have received, 600 crores already we have provided, so there is almost nothing to be provided henceforth, is that right? Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Sir, we have provided 60%, in future, so 40% is left over.
Generally, our philosophy is to make provision as far as possible, so we may do it this quarter, remaining amount also. Mr. Pranav: Correct but you have said that you have received 200 crores also, right, so 800 crores… Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Today, after excluding 220 crores, which are received, now the balance is 1200 crores roughly. Mr. Pranav: Okay, okay, got it, thank you. Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Thank you, sir. Host: Our next question is from the line of Mr. Bhavik Shah.
Please unmute yourself and go ahead.
Bhavik Shah?
Okay.
Our next, yeah. Mr. Bhavik Shah: Hello. Host: Yes please, go ahead. Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Hello. Mr. Bhavik Shah: Hi sir, thank you for the opportunity.
So, I just wanted to know, what will be your liquidity coverage ratio this quarter? Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Sir, as of date, it is 125% LCR. Mr. Bhavik Shah: And sir, in… Sri L.V.
Prabhakar – MD & CEO, Canara Bank: Yeah, please. Mr. Bhavik Shah: No sir, go ahead. Sri L.V.
Prabhakar – MD & CEO, Canara Bank: As of date, it has increased to 147.
As on balance sheet date, we are about 125. Mr. Bhavik Shah: Okay and sir, why has there been a drastic change, because of deposits from 120 to 140? Mr. A V Rama Rao – CGM, Canara Bank: RBI has given this latest on 19th April, some MSF relaxations as per HQLAs, that is also there. Mr. Bhavik Shah: Okay, okay, understood sir, answer one more thing, I wanted to understand how. has the slippage been from the restructured book and what would be our outstanding restructuring number? Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Sir, restructuring book is 14,000 crores as far as under the resolution framework 2 is concerned and about 5,000 crores under resolution framework 1, put together it is about 19,000 to 20,000 crores.
We are observing about 4% to 4.5% as slippages and in this restructured book now in a resolution framework 1, the repayment is up to 95% and in resolution framework 2 the repayment is about 85%. Mr. Bhavik Shah: Okay, okay, understood Sir.
Sir that's it from my side.
Thank you. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Thank you Sir. Host: Our next question is from the line of Mr. Abhijeet Sakare.
Please unmute yourself and go ahead. Mr. Abhijeet Sakare: Yeah, hi good evening Sir. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Good evening Sir. Mr. Abhijeet Sakare: Sir first question is on the investment provision, there's 1,000 crore hit that we've taken, this relates to the security receipt book. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Exactly correct Sir because it has crossed eight years, so we have made 100% provision. Mr. Abhijeet Sakare: Okay and then there is a 1,500 crore which is still pending there so that would also get marked down consequently. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: It will take some years not immediate Sir. Mr. Abhijeet Sakare: Okay. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: It will take some years.
Immediately there maybe around 300 to 350 crores which if at all required to make the provision in the full financial year. Mr. Abhijeet Sakare: And Sir on the G-Sec book the impact that you're sharing potential future impact what are you looking at in terms of the cutoff yields when you're calculating that number? Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: We are you know that is our outlook is somewhere around 7.50 to 7.60, that is what we expect. Mr. Abhijeet Sakare: Okay, sure.
Sir second question is on the slippages if you just reduce -- if you deduct all the retail, agri, SME slippages, we still have 1,600 crores of corporate slippages, so trying to understand if this is like really spread out across a lot of accounts or if there is any large account still sitting there? Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Large accounts at the most it is about 150 or 120 crores, not in four digit figures or not in higher vertical I can say 3 digit figure, it's a spread over year. Mr. Abhijeet Sakare: Sure and the last question is a clarification on the pricing of home loans for example so when we increase the RLLR rate by 40 basis points how are we -- are we doing anything on the spreads as well, is that is that being retained, are we cutting it, how are we dealing with the spread on top of the RLLR tweaks that we are doing? Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: As far as RLLR is concerned, we have increased 40 basis points by maintaining the speed as it is. Mr. Abhijeet Sakare: So there's a straight 40 basis point Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Yes. Mr. Abhijeet Sakare: impact Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Yes. Mr. Abhijeet Sakare: On the Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: And a portfolio above 34% of my book. Mr. Abhijeet Sakare: Okay, got it Sir.
This is useful.
Thanks a lot. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Thank you Sir. Host: Thank you Sir.
Our next question is from the line of Mr. Dikshit Doshi.
Please unmute yourself and go ahead. Mr. Dikshit Doshi: Yeah can you hear me? Host: Yes. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Yes I can hear you.
Please go ahead. Mr. Dikshit Doshi: Thanks for the opportunity.
So most of the questions have been answered just one question so you know looking at the growth that we are targeting for FY23 and also the recovery and upgradation we're targeting is it fair to assume that in FY23, we will not require any fund raising. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Sir as on date with my present CRAR off 14.9%, I can comfortably achieve a great growth of about 10%; however, our philosophy is to strengthen the balance sheet and strengthen the capital base as far as possible and since now the Canara Bank is in a very strong footing, we can raise at a very competitive rate AT1 bonds and Tier 2 bonds.
Equity, we are not looking as of now, so AT1 bonds and Tier 2 bonds to the extent of about 9,000 crores, we may rise and this will be taking to our board in the next board and once the approval is there, then will be coming to the market. Mr. Dikshit Doshi: Okay, okay.
Thanks.
That’s it from me. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Thank you sir. Host: Thank you Sir.
Our next question is from the line of Mr. Jay Mundra.
Sir please unmute yourself and go ahead. Mr. Jay Mundra: Yeah, hi Sir good evening.
I have three set of questions. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Sir good evening Sir, please. Mr. Jay Mundra: Good evening Sir.
Sir first on Can-Fin, so if you can suggest what is the course of action here in the interim will the current MD, CEO stay or there could be a potential change of management there and you know and also it looks like the amount of fraud is not that material considering their balance sheet side, so you know what is the thought process there. Mr. Debashish Mukherjee – ED, Canara Bank: So, I will break up this question into two three parts.
One with regard to the stay of MD and CEO there at Can-Fin Homes, you see at the present moment we do not foresee any change, that is #1. #2 is with regard to this whistleblower complaint as we have been explaining you, this has been forwarded by NHB, so we had to pay a lot of attention and seriousness on that and which led to discovery of certain fraud accounts amongst other irregularities which we have already you know taken rectification action on them like provision of the fraud accounts and etc. etc. on the irregularities.
Now as our MD Sir was telling you -- -- since we have found out certain lacuna -- we wanted it to be more broad-based.
So, is the idea with regard to why we appointed the central statutory auditors of the company to themselves verify and see the books so that it is made more strong in the near future.
So, that is what the basic idea which we have in this area. Mr. Jay Mundra: Understood Sir.
Second question is Sir on your corporate slippages once again, so out of 1,600 crores corporate slippages and your SMA 1 + 2 that still remains the more or less similar, so what is the sanctity of this SMA 1 + 2 number when you have 1,600 crores of corporate slippages and you still have let's say 1,200 crores pending from future, so how should one look at you know this 6,000 crores of SMA 1 + 2 it looks like it does not show the real riskiness in the book, so how would you tie that up. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Sir as far as the corporate is concerned regarding this SMA 2 and SMA 1 which accounts to about 0.7%, this is above 5 crores and regarding the slippages of 3,600 crores from which we said that excluding retail, MSME, agriculture, there is other small accounts called small businesses and others also and excluding this the corporate there is no big account even if it is a big amount it is about 110 crores or 120 crores.
So put together in a full quarter, the slippages were about 3,600 crores including everything and the SMA 1 and SMA 0 where we are projecting about 6,000 crores, there can be some slippages, but not significant slippages in the current quarter. Mr. Jay Mundra: Right.
Sir what I was saying is that last quarter we also had the similar number which looks very small, less than 1% Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: No sir, last quarter we had 5,000 crores -- last March we had about 5,000 crores compared to this March which is about 0.7% in SMA 2 and about 10,000 crores in SMA 1 which is about 1.47%, put together it is 15,000 crores which constitutes about 2.17%. Mr. Jay Mundra: No, no so I was comparing sir slippages of 1,600 crores in corporate is clearly for this quarter, so maybe I was comparing versus last quarter, there is not too much change in the SMA 1 + 2 and we have Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Total 1,600 crores is not corporate Sir, in that again there are small businesses and retail also to some extent where they are not corporates and corporates when we say 100 crores, 150 crores such accounts are 1 or 2 only. Mr. Jay Mundra: Okay understood and 3rd question is capital and tax, so one is we have accumulated losses of 18,000 crores plus, which we have set off despite having that you know it looks like we are still paying accounting taxes whereas one other PSU banks when they you know shifted to new tax regime or without shifting to new text regime when they had accumulated loss, they were still showing negative taxes.
So, why are we not showing tax provisions write back when we have accumulated losses or if you can explain that? Mr. Ramachandra – Chief General Manager: See as already informed by our MD and CEO as long as advantages to the bank with higher tax regime we are continuing with the higher tax regime.
I confirm that as on today it is advantageous to us to have a higher rate of tax because of the reversal of the whatever carry forward loss, so when it is advantageous with the new text, we are really going to shift. Mr. Jay Mundra: No, so I am asking Sir when we have accumulated losses of 18,000 crore why are we still paying taxes? Mr. Ramachandra – Chief General Manager: Sir see the accumulated loss is not a static every time it is reducing also, I can only tell it is advantageous as on today with a higher rate of interest.
With tax paying also it is advantageous, totally overall it is advantageous to the bank. Mr. Jay Mundra: Sorry how Sir, how paying taxes are advantageous? Mr. Ramachandra – Chief General Manager: I will -- you can come off the line, we can explain. Mr. Jay Mundra: Sure, sure sir.
Okay and lastly on IFR Sir, Investment Fluctuation Reserve, it looks like RBI had asked bank to provide at least 2% of IFR and it looks like we did not we have only done some 1.7% or something if I look at the last annual report. Mr. Ramachandra – Chief General Manager: It is fully provided now.
It is fully provided. Mr. Jay Mundra: Okay, okay.
Sure Sir and how much is the Host: Sir you are requested to please come back.
Thank you. Mr. Jay Mundra: Sure. Host: Thank you Sir.
Next question is from the line of Ms. Neha.
Please unmute yourself and go ahead.
Ms. Neha please ask your question ma'am. Ms. Neha: Plans to selling of any of your subsidiary is on the fundraising plan? Host: Ma'am could you please be a little louder. Ms. Neha: Just wanted to know any plans you're planning to sell any of your subsidiary and second question is any plans to raise the capital considering the growth which we are targeting. Mr. Debashish Mukherjee – ED, Canara Bank: Madam to answer your first question at present we do not see any necessity for any you know lowering our stake in any of our subsidiaries for the present moment that is number one.
With regard to raising of capital, as our MD had very clearly stated that regarding the growth which we are envisaging in credit it is not necessary for us to raise capital on account of that, but for strengthening the balance sheet further we may come out with some you know plans for raising capital which we will separately take up with our Board of Directors in the in the coming months and get their permission and then we will announce them.
Could you get my answer Madam? Ms. Neha: Yes and sir one more thing during the fourth quarter we have seen a high substantial fee income can we expect the same trajectory to be continue in the coming quarters or the fee income side. Mr. Debashish Mukherjee – ED, Canara Bank: You see our endeavor is always for you know maintaining the fee income of course the contribution of treasury would be less, but at the same time the fee income by way of Commission and the LCBG Commission, and other our bank assurance business, government business, service charges etc., we would continue the same level of income so far as the fee based income is concerned. Ms. Neha: Okay, got it sir.
Thank you. Host: Thank you ma'am.
This would be our last question for the day.
I will now pass on the mic to MD sir for his closing remarks.
Sir. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Thank you very much for all the investors for giving us an opportunity to clarify if any doubts are there and also to project our future guidance.
Today, really we are happy as our board has kind enough to declare the dividend for which we have worked hard in the last two years to take care about our investors, about our staff, and about our stakeholders.
We expect this same type of support and cooperation from you all people.
Thank you very much. Host: Thank you Sir.
On behalf of Antique Stock Broking, I thank the Canara Bank management for giving us the opportunity to host them.
Thank you everyone for joining in.
Goodbye and have a good weekend. Mr. Ramachandra – Chief General Manager: Thank you. Mr. L.V.
Prabhakar – MD & CEO, Canara Bank: Thank you.
Bye, bye.
End of Transcript
Questions and answers
+91 80 22100250 · Research Analyst
Q4 FY2022