Canara Bank Shares Tumble 7% Following Q2 Earnings as Profit-Booking and Weak Treasury Income Weigh

Shares of state-run Canara Bank experienced intense selling pressure on Thursday, dropping nearly 7% to touch an intraday low of ₹116.71 on the National Stock Exchange (NSE). The sharp slide followed a 3.87% rally in the previous session when the bank unveiled its financial results for the second quarter (Q2).

The counter emerged as the primary drag on the Nifty PSU Bank index, which slipped 2.2%, contrasting with the benchmark Nifty 50 which traded higher. Over 21 million shares changed hands within the opening half-hour of trading, making it one of the most heavily traded counters on the exchange.

Mixed Earnings Profile Triggers Profit-Taking

Market participants pointed to profit-booking after Wednesday’s intraday surge of over 5%, coupled with lingering concerns over non-interest revenue.

Although headline numbers showed resilient core performance, non-interest income declined 18.2% year-on-year to ₹5,772 crore. The downturn was largely driven by a 68.5% year-on-year plunge in treasury income to ₹499 crore, compared to ₹1,583 crore in the corresponding period last fiscal, as hardening bond yields took a toll. Consequently, profit on the sale of investments dropped 87.4% to ₹153 crore from ₹1,217 crore.

This drop in other income capped operating profit before provisions and contingencies at ₹8,758 crore, reflecting an increase of just 2% year-on-year from ₹8,588 crore.

Headline Financial Metrics at a Glance

Despite the market reaction, the public sector lender delivered improvement in credit growth and core operating profitability:

• Net Profit: Rose 8.4% year-on-year to ₹5,175 crore compared to ₹4,774 crore in the year-ago period.
• Net Interest Income (NII): Jumped 20.4% year-on-year to ₹11,005 crore, supported by net interest margin (NIM) expansion to 2.53%.
• Balance Sheet Expansion: Global deposits grew 13.13% year-on-year to ₹16,97,305 crore, while global gross advances surged 19.46% to ₹13,75,060 crore.
• Provisions: Total provisions and contingencies fell 6.1% year-on-year to ₹3,583 crore, with bad loan provisions declining to ₹1,339 crore from ₹1,504 crore.

Asset Quality and Brokerage View

The bank’s asset quality parameters showed sustained improvement during the quarter. Gross non-performing assets (GNPAs) improved significantly, contracting by 102 basis points year-on-year to 1.33% of gross advances from 2.35% a year earlier. Net NPAs dropped to 0.30% compared with 0.54% at the end of September last year.

Following the quarterly scorecard, domestic brokerage firm JM Financial upgraded the stock to 'Buy' from 'Add', citing inexpensive valuations and solid underlying operational fundamentals, while revising its target price upward to ₹150 from ₹142.

Tags: Canara Bank NSE Nifty PSU Bank Nifty 50 Banking Sector Q2 Results