Daijiworld Media Network - Bengaluru

Bengaluru, Jul 27: Public sector lender Canara Bank is optimistic about business momentum picking up in the second half of FY26, despite a relatively slow start in Q1, said MD and CEO K Satyanarayana Raju during an interaction with NDTV Profit.

Raju attributed the bank’s positive outlook to stable Return on Assets (ROA) and improving returns. “Hopefully, we will maintain the 1.14% ROA recorded in Q1 going forward. The second half of the financial year will be the peak in business across the banking sector,” he said.

The bank posted a 22% year-on-year jump in net profit for Q1 FY26, which Raju credited to strong non-interest income, especially from Priority Sector Lending Certificates (PSLCs). “We earned nearly Rs 1,200 crore from PSLCs, driven by high demand. Our fee income also grew 16%, and treasury income contributed well due to our AFS portfolio,” he added.

While Net Interest Income (NII) fell 1.71% YoY to Rs 9,009 crore, Raju clarified that the decline was due to lower yields on advances. “Absolute interest income was stable at Rs 31,000 crore, but yields dropped as RBI cut repo rates by 100 basis points. Yield on advances fell from 8.83% to 8.47%, impacting NIM and ROA,” he explained.

The bank’s Net Interest Margin (NIM) slipped from 2.9% in Q1FY25 to 2.55% in Q1FY26, even as net profit rose to Rs 4,752 crore from Rs 3,905 cr a year ago.

Addressing the drop in CASA deposits, Raju said it was a seasonal trend linked to institutional clients. “Current deposits fell from Rs 77,800 crore to Rs 54,000 crore mainly due to decline in institutional deposits from PSUs and PSCs,” he said.

Despite the Q1 headwinds, Canara Bank remains confident of a stronger performance in the second half of FY26, backed by improving returns and sector-wide business momentum.