Canara Bank Ltd. shares fell 6.12% to Rs 117.12 in early trade on Thursday, trading near their 52-week low, after the lender’s earnings call flagged a potential one-time expected credit loss (ECL) provision of up to Rs 15,000 crore and disclosed treasury losses for the September quarter.
The stock fell from its previous close of Rs 124.76 and touched an intraday low of Rs 116.71, compared with its 52-week low of Rs 116.51 recorded on Oct. 7. Trading volume stood at 2.05 crore shares, 1.47 times the 30-day average, at 9:33 a.m., according to the supplied stock data.
The disclosures came during the bank’s second-quarter earnings call at 4 p.m. on Wednesday, after market hours. While Canara Bank reported its highest-ever quarterly net profit, management discussed the potential cost of the ECL transition and the effect of higher bond yields on its investment portfolio. The extent to which these disclosures contributed to Thursday’s share-price decline is not established by the available data.
READ | Canara Bank Q2 Results: Net Profit Rises Over 8%, NII Climbs 20%; Asset Quality Stable
Canara Bank’s ECL Estimate Rises To Rs 15,000 Crore
Managing Director and CEO Brajesh Kumar Singh said the bank’s estimated one-time ECL provision could range from Rs 12,000 crore to Rs 15,000 crore, up by around Rs 3,000 crore from its earlier estimate. He attributed the increase partly to higher bond yields and the additional mark-to-market provisioning requirement.
The Reserve Bank of India has allowed a transition period of up to five years. However, management indicated that the bank might recognise the provision over about two years, depending on market conditions and the movement in bond yields.
Singh said there was currently no plan to pass the additional cost on to customers. He acknowledged that return on assets could fall below 1%, although the bank expects higher profits and improving asset quality to help absorb the impact.
Treasury Losses And Earnings
Canara Bank reported a loss of around Rs 1,300 crore on its available-for-sale investment portfolio during the quarter. The CFO said this was adjusted against the AFS reserve.
Management also disclosed a loss of around Rs 55 crore in the fair-value-through-profit-and-loss portfolio, compared with gains of approximately Rs 555 crore in the previous quarter.
Despite these pressures, net profit rose 8.4% year on year to Rs 5,175 crore in the September quarter. Net interest income increased 20.39% to more than Rs 11,000 crore. Gross non-performing assets stood at 1.33%, while net NPAs were 0.30%.
The earnings-call disclosures provide possible context for the decline, but the available evidence does not establish them as its direct cause.
