CANBK Q2 FY27 Earnings Call: ECL Provision Estimate Raised to Rs. 12,000-15,000 Cr, Profit Seen Above Rs. 20,000 Crore

CANBK held its Q2 FY27 earnings call on October 14, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Broad Guidance Outperformance Across Headline Metrics

• Net profit of Rs.5,175 crore (+8.40% YoY) — NII grew 20.39% YoY to over Rs.11,000 crore; global business reached Rs.30.72 lakh crore (+15.88% YoY vs Q2 FY 2025-2026).
• Asset quality beat guidance — GNPA at 1.33% (FY 2026-2027 guidance: 1.50%), NNPA at 0.30% (guidance: 0.40%); credit cost improved to 0.47% (guidance: 0.75%) and annualized slippage ratio was 0.58% (guidance: 0.80%).
• RoE of 18.49% — well above the FY 2026-2027 guidance of 16.5%; RoAA at 1.04% (guidance range 1.01-1.05%) and EPS at Rs.22.06 (guidance: Rs.20.00).
• Growth rates exceeded full-year FY 2026-2027 guidance — business growth 15.88% vs 10-11% guided, advances 19.46% vs 11-12%, deposits 13.13% vs 9-10%.
• CASA ratio of 29% missed the 30-32% guidance range — management attributed this to raising Rs.55,000 crore (USD 5.8 billion) in FCNR(B) deposits during the quarter.
• PCR improved 175 bps YoY to 95.34% — CRR (as reported) stood at 17.19%; LCR as of 30 September was 115%.

FCNR(B) Substitution Protects NIM; Yields Grinding Higher

• NIM of 2.55% in Q2 FY 2026-2027 — management guided it can sustain 2.55% for FY 2026-2027, citing a 25 bps rate hike and 53% of the book being repo-rate linked.
• FCNR(B) strategy saved ~100 bps in deposit cost — bulk deposits held flat at ~Rs.4.38 lakh crore by replacement with FCNR(B) at 6.5% vs bulk at 7.5%, plus an additional 22-23 bps on CRR/SLR; FCNR(B) prevented Rs.30,000-35,000 crore of higher-cost bulk deposits.
• Corporate loan yield improved to 7.72% — up from 7.68% in Q1 FY 2026-2027; gold loan yield improved to 9.10% from 8.96%; retail lending margin at 8.65%.
• Gold loan competition from NBFCs acknowledged — management noted NBFCs borrow from banks and cannot price as aggressively, and guided yields will not decline and will improve further.
• Loan yields improved 3-4 bps YoY — driven by disciplined underwriting (no sub-7 loans) and the shift from high-cost deposits; the lower FCNR(B) spread (40-50 bps vs overall 2.55%) is expected to be compensated by cost savings.
• Treasury posted a Q2 loss on 44 bps yield hardening — total treasury (trading/MTM/OMO) loss of Rs.153 crore including MTM loss of Rs.61 crore, a ~Rs.600 crore negative swing from Q1 FY 2026-2027's Rs.654 crore treasury profit; offset by NII growth.

Retail Momentum Strong; Rs.50,000 Crore Corporate Pipeline

• RAM advances grew 21.30% YoY — retail credit up 31.61%, MSME up 15.49%, housing loans up 17.35%, vehicle loans up 25.50% (Q2 FY 2026-2027).
• Corporate pipeline of ~Rs.50,000 crore — Rs.30,000 crore in hot leads and Rs.17,000 crore sanctioned but undisbursed, primarily in green energy, battery energy storage, power evacuation, and data centers.
• Agri advances reached Rs.3,04,000 crore — QoQ growth of ~10% from Q1 FY 2026-2027's Rs.2,76,000 crore; gold loans Rs.1,74,000 crore, core agri Rs.1,30,000 crore (core agri growing ~9% in FY 2026-2027).
• Total gold loan book of Rs.2,82,000 crore — Agriculture Rs.1,74,000 crore and Non-Agriculture Rs.1,08,000 crore in Q2 FY 2026-2027.
• Cumulative ECLGS disbursement of 13,000+ crore — as of Q2 FY 2026-2027; advances against FCNR(B) deposits were 3.2 billion of total deposits of 5.8 billion, partly utilized and partly used for bulk replacement.
• Advances growth guidance of 11-12% for FY 2026-2027 not revised — management noted actuals are already outperforming at 19%.

ECL One-Time Impact Raised; Absorption Path Laid Out

• One-time ECL provisioning estimate revised up to Rs.12,000-15,000 crore — from Rs.10,000-12,000 crore guided in Q1 FY 2026-2027, contingent on yield conditions; MD & CEO guided total ECL impact (including HTM) at ~Rs.12,000-14,000 crore, up from ~Rs.10,000-12,000 crore.
• Additional Rs.2,000-3,000 crore expected from M2M provisions — due to hardening of yields; management considers the total impact manageable at 1.0-1.2% of RWAs given CRAR of 17.19%, CET1 of 12.80%, and PCR of 95.34%.
• RBI provided a 5-year dispensation for ECL provisioning — management indicated absorption will likely be faster; a decision on amortization (one year vs spread across years) is deferred to Q4 FY 2026-2027.
• Dry run of ECL models expected by end of Q3 FY 2026-2027 — technical knowledge partner Coforge is developing the models, ahead of the regulatory deadline of April (FY 2027-2028); no final ECL run was required by 30 September 2026.
• Steady-state credit cost impact of ECL for FY 2027-2028 expected to be offset — by improving credit costs, with no revision to the earlier 4-5 bps guidance from Q1 FY 2026-2027; management guided the new normal for ROA will be ~80 bps in FY 2026-2027 if ECL costs are not passed on to customers.
• FY 2026-2027 profit expected to exceed Rs.20,000 crore — allowing the Rs.12,000-15,000 crore ECL provision (~10% of book value) to be absorbed over 2 years (FY 2026-2027 to FY 2027-2028) without materially impacting credit cost; buffers cited include FY 2025-2026 profit of Rs.19,000 crore and H1 FY 2026-2027 profit of Rs.10,000 crore.
• PCR raised 175 bps in Q2 FY 2026-2027 — management prioritized balance sheet strength over reported profit to aid ECL management; risk-weighted assets declined QoQ.

Slippages Contained; Drought Exposure Disclosed

• Total Q2 FY 2026-2027 slippages of Rs.1,844 crore — MSME Rs.777 crore, Agriculture Rs.687 crore, Retail Rs.327 crore, Gold Rs.40 crore, Corporate Rs.13 crore.
• SMA-0/1/2 (Rs.5 crore+ segment) at 0.51% (Rs.7,043 crore) — SMA-2 0.21% (Rs.2,838 crore), SMA-1 0.09% (Rs.1,304 crore), SMA-0 0.21% (Rs.2,901 crore) in Q2 FY 2026-2027.
• Overall portfolio SMA at 2.42% (Rs.33,340 crore) — SMA-2 0.9%, SMA-1 0.53%, SMA-0 0.99% across all ticket sizes; stress on >Rs.5 crore accounts was 0.30% and Q1 FY 2026-2027 slippages were 0.15%.
• Rs.13,900 crore exposure in drought-hit Karnataka and Maharashtra — restructuring via SLPC with SLBC dispensation expected; management guided no significant impact on recovery.
• Written-off pool of ~Rs.18,000 crore (1.33% of advances) — new slippages at 0.15% per quarter; recovery is outpacing slippage, though absolute recovery is expected to decline as the pool shrinks.

Guidance Reiterated; Digital MDR Upside Deferred

• FY 2026-2027 guidance reiterated: 2.5% NIM and 1.02% ROA — management acknowledged the stock trades near book value (~Rs.125) and met analysts/investors to improve valuation; management requested analysts' ongoing support to improve market capitalization.
• RBI Governor raised the repo rate by 25 bps — and revised the FY 2026-2027 GDP growth projection up by 40 bps to 7-7.1%.
• UPI MDR earnings minimal near term — the bank currently pays switching charges without earning MDR fees; the impact of the new UPI MDR regulation (Rs.2,000 transaction threshold, Rs.300 cap) had not been calculated as of Q2 FY 2026-2027 as it is not yet implemented; potential FY 2027-2028 MDR earnings are contingent on higher transaction volumes and wider utilization of the AI One Pay platform.
• Early Q2 results release was an internal decision — to free up ~2.5 months for the quarter; management rejected analyst speculation of government-driven merger preparation.
• Canara Bank Sector subsidiary divestment yielded 4x — on a Rs.14 crore investment in Q2 FY 2026-2027; IT refund interest income was Rs.90 crore and AS15 (pension & gratuity) provision was Rs.950 crore (vs ~Rs.900-910 crore in Q1 FY 2026-2027).
• Investment book composition: 80% HTM, ~15% AFS, ~4-5% FVTPL — AFS absorbed a Rs.1,300 crore loss with no P&L impact; FVTPL recorded a Rs.55 crore loss in Q2 FY 2026-2027 vs Rs.555 crore earning in Q1 FY 2026-2027.