Canara Bank Ltd (CANBK) Q2 FY23 Earnings Concall Transcript

Canara Bank Ltd (NSE:CANBK) Q2 FY23 Earnings Concall dated Oct. 20, 2022

Corporate Participants:

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

S K Majumdar — Chief Financial Officer

Analysts:

Mona Khaitan — — Analyst

Deepak — — Analyst

Prakash — — Analyst

Bhavik Shah — — Analyst

Pranav — — Analyst

Anandama — — Analyst

Saket Kapoor — — Analyst

Ashok — — Analyst

Mahrukh Adajania — Edelweiss — Analyst

Rushab Inderkar — — Analyst

Jay Mundra — — Analyst

Presentation:

Operator

Good afternoon ladies and gentlemen. Welcome to Canara Bank’s 2Q Earnings Call hosted by Antique Stock Broking. The management is represented by Shri. L.V. Prabhakar, MD & CEO, Shri. Debashish Mukherjee, ED, Shri. K. Satyanarayana Raju, ED, and Shri. Brij Mohan Sharma, ED. After the initial comments from the management, we will have a Q&A. Without any further delays, handing over the mic to MD sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thanks a lot. Thank you very much. First of all, let me convey my gratitude and thanks to all the analysts for participating in this interactive session with the management. I would like to tell the highlights in brief because other things we’ve already seen from the presentation which we have uploaded. We have a decent business growth in Q2 FY ’23. Especially in credit sales, it is about 20%. And deposits have grown by 9.82%. Both above the industry average. And business has grown by 13.89%. In the last 12 months, we have added about roughly INR2.4 trillion [Phonetic] balance sheet to the existing outstanding and now it stands at INR19.58 trillion [Phonetic], the balance sheet size. Going forward, we are of the view that the growth momentum which we are observing will continue and will be having a decent double-digit growth.

Coming to the credit side, especially retail credit. RAM, which is about 55% and corporate is 45% as we have given the guidance that our credit portfolio will be 55% RAM, 45% corporate plus or minus 2%. So we maintain a RAM percentage of 55% and the RAM has grown at 16.4%. Retail has grown at 12.52%, agriculture about 21%, MSME about 13% and corporate at 25%. Overall growth is at 20%.

And regarding the recovery under the present quarter, we have seen a very good recovery. In a sense, a cash recovery was about INR1,876 crores plus a cash recovery of INR1,205 crores in written-off accounts. Getting recovery in written-off accounts is one of the, I can say, a bit difficult task. However, my people have contacted the people that especially the written-off accounts and the borrowers and we could recover about INR1,205 crores in the Q2 quarter FY ’23. Regarding the upgradation, again, this quarter, it was a bit attractive and it is about INR1,533 crores. Percentages-wise, it was, I think, reasonably good work has been done. The Gross NPA has come down from 8.42% to 6.37%. And going forward, we are hopeful that as we have given the guidance of 6%, we will be achieving that. Our Net NPA has come down from 3.21% to 2.19%. And as we have given the guidance, the Net NPA will be less than 2% in a shorter period. We are very interested in increasing the provision coverage ratio. And it has increased from 82.44% to 85.36%. Credit cost were controlled at 1.31% and slippages were at 0.35%.

Now coming to the main parameters. Regarding the income and also the expenditure, there is a decent interest growth, especially 20% in interest received and advances. And NII, it has grown to 18.51%. And during the current quarter, it has grown by 9.57%. Expenditure, we have controlled and we have invested a good amount this time in IT and also in infrastructure. And this will give going forward a good dividends. And the operating profit, which was at INR5,600 crores in September ’21, has increased to INR6,905 crores in September ’22 showing your quarter-on-quarter growth of 4.5% and year-on-year growth of 23%. Net profit, we are happy to share that the YOY growth is about 89% and Q-on-Q, it is about 25%. So what we observe is there is a decent business growth, a very good recovery, and also the ratios are very attractive and the capital has strengthened. The CRAR has increased from 14.37% to 16.51% and common equity from 10.09%, it has increased to 11.14%. With this capital and also the deposit base, we are future ready to take a good credit growth, which will ultimately lead to good income.

Some key ratios I would like to share with you, ROE, for the quarter, it is 0.79%. Our projections were 0.70% for March ’23 and a return on net worth, we have touched 18.86% and cost to income ratio, it is at 43.68%, which is one of the lowest we are having. And earning per share, it is about 55.22% from 29.86% in September ’21. Now, it is at 55.22%. And then NIM from 2.7%, now it has been increased to 2.86%.

With all these good parameters, now our philosophy and aim is whatever extra income in additional income we are earning, we want to pass on to our depositors because of which we have brought in a new deposit scheme that is 666, 666 by paying 7% interest and for retail, it is 7.5%. In the last 12 days, there was a very good traction and more than INR8 lakh fixed deposits were open with a significant amount, which will help the Canara Bank in the current year — current quarter and also the coming quarter to take care about the credit demand that is very much visible in Canara Bank.

With these few observations, now, it is open for question and answer. Over to you, sir.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] A question is from the line of Ms. Mona Khaitan [Phonetic]. Please unmute yourself and ask.

Mona Khaitan — — Analyst

Hi, sir. Am I audible?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, ma’am. Please go ahead.

Mona Khaitan — — Analyst

Yeah. Hi, sir. Good evening and thanks for taking up my question. So the first query is on restructured book. Where would the aggregate book stand today?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, regarding the restructured book, that is Resolution Framework 1 and Resolution Framework 2, which we have not given in this one because now it is the history. However, I’ll share the details with you. In Resolution Framework 2, the slippages were 13% and remaining is performing.

Mona Khaitan — — Analyst

Okay. Which is this quarter or cumulatively?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Cumulative, ma’am. It is cumulative.

Mona Khaitan — — Analyst

Okay. And where does the book stand if I have to include the MSME restructuring outside and then…

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

It is at INR20,000 crores. Earlier, it was INR24,000 crores. There is recovery of about INR3,000 crores. Now, it has come down to INR20,000 crores.

Mona Khaitan — — Analyst

Okay. Actually last quarter you had mentioned about INR18,000 crores. So it was not reconciling with this INR20,000 crores mentioned in the notes to account. So what exactly happened in between?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, earlier, we have included all the sectors and that was the figure. Now we are throwing about the RF2, which I’m telling.

Mona Khaitan — — Analyst

Okay. This is just Resolution Framework 2?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes.

Mona Khaitan — — Analyst

But if we include all the sectors there with the numbers then?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, eligible under RF2.

Mona Khaitan — — Analyst

Okay, sir. And can we have the breakup of your slippages?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes. Slippages were INR3,500 crores. Out of which, INR1,200 crores is agri, INR1,300 crores is MSME, INR600 crores is the retail. Rest is miscellaneous. INR400 crores is miscellaneous.

Mona Khaitan — — Analyst

Okay. And just finally, with regards to infra NPA, it’s declined by about INR1,600 crores on a Q-on-Q basis. So is there some large recovery or what exactly has happened there?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Infra, the NPA, no, it has come down to 6.79%. The amount is because of repayment in regular accounts as well as in NPA accounts also in various accounts.

Mona Khaitan — — Analyst

Okay, sure. And just finally, where would our ECLGS book live?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

As on date?

Mona Khaitan — — Analyst

Yeah.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

GECL book, what’s the figure? One minute, ma’am. I’ll share with you. Ma’am, we have disbursed about INR18,000 crores and sanctions were about INR19,000 crores. This is the amount which we have disbursed and sanctioned under ECLGS as on 30th, September ’22.

Mona Khaitan — — Analyst

Okay. And what sort of slippages have we seen from this portfolio? Any?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Out of this INR669 crores is the slippages. Out of sanctions of INR19,000 crores in disbursement of 18,000 vendors, slippages is INR669 crores. That is around 3% to 4%, 3% to 4%.

Mona Khaitan — — Analyst

Got it. Thank you so much. I’ll come back in the queue.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, ma’am.

Operator

Thank you, ma’am. [Operator Instructions] The next question is from the line of Mr. Deepak [Phonetic]. Sir, please unmute yourself and go ahead.

Deepak — — Analyst

Yeah. Am I audible, sir?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, sir. Please Deepak ji,

Deepak — — Analyst

Okay, yeah. Thank you very much for the opportunity. So just I wanted to understand now in your opening remark, you mentioned about the good credit growth demand, visible rate and this extra deposit that you are taking through this deposit will help you meet that credit growth demand and as such we are already at about 20% growth. So I just wanted to understand annually we are still kind of looking at 8% growth, so there’s a big disconnect between what we are achieving and what we are suggesting. So any comment from that would be helpful?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah. Regarding the projections which we have given in of the year, 8% credit growth, that is considering that there will be one COVID wave or there will be recession. All those factors taking into consideration. We have given 8%. However, such things have not happened and there is a very good climate for credit growth. So we could achieve 20% and 20% is a very decent growth. We are confident that there will be a decent double-digit growth, which is more than 8%.

Now coming to the funds which you are raising for the onward lending. As we said, our target is to maintain a RAM 55%, corporate 45%. In RAM, you have already seen a growth of 16.4%, which includes retail, agri, MSME and others except corporate. This growth, we expect that during the current quarter will continue. So for that, we require funds. And going forward, we are of the view that because of the liquidity situation in the market, the deposit rates are bound to rise. If you are first in the market, you get the advantage. With the amount which we have mobilized, that is more than INR8 lac FDR. We are in a comfortable position to take care about the decent double-digit credit growth that is going to be there in the current quarter and in the coming quarter.

Coming to the corporate, 45% of my loan book. Corporate nowadays, we are seeing lot of inquiries and lot of drawls also we are seeing, especially in infra, especially in NBFCs, in petroleum coal products and also in chemical and to some extent iron and steel and also food processing. So we observe that during the current quarter, there will be a good demand from corporates also. So our aim is always to be ready for the future and to have a strong balance sheet.

Deepak — — Analyst

Just a follow-up. You mentioned decent double-digit credit growth of 15%, 20% is what the range that we’re looking at?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

See. I said decent double-digit growth. When I say 8%, we have 20% growth. So when I say decent double-digit growth, you can understand.

Deepak — — Analyst

Okay, sir. Yeah, that’s it from my side. All the very best, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, sir. Thank you.

Operator

Thank you, sir. Our next question is from the line of Mr. Ashok [Phonetic]. Sir, please unmute yourself and go ahead. Mr. Ashok? Mr. Ashok, are you there?

Okay. We’ll move to the next question. Our next question is from the line of Mr. Prakash [Phonetic]. Sir, please unmute yourself and go ahead. Mr. Prakash?

Prakash — — Analyst

Am I audible?

Operator

Yes, you are, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah.

Prakash — — Analyst

First of all, like very good. Congratulations for the hefty numbers, for the good numbers shown in this quarter.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, sir.

Prakash — — Analyst

I have a few questions. One is that I remember last time you mentioned that because of the RBI change of REPO rate, which you affected only from 7th July onwards. So there is going to be some additional interest in over INR250 crores. So in this quarter, when I calculate the NII, simple NII, like interest assured minus interest suspended. In June quarter, it was INR1,558 crores. And in September quarter, it was INR1,986 crores. So which means increased by about INR428 crores. So can I presume that out of INR428 crores, INR250 crores all were because of the 50 basis point increase which was given in the floating rate account from effective from 7th of July? So it means in the next quarter, December quarter, we won’t see such increase of INR428 crores in the NII?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Here, let me answer in a different way. See this time, the NII was at INR7,434 crores. Again, you all know that this is based on the cost of deposits and also yield on advances. INR250 crores or INR200 crores, which we received because of a REPO increase is factored in and that INR250 crores will continue this quarter also because it is already inbuilt. Not only that. Apart from that in the hardening interest rates, we increase the spread also and also the interest income from other than RLLR also. For example, MCLR. MCLR have increased. MCLR is also contributing. Apart from that, in the normal-course corporate advances also, we have increased the rate. So the estimation that only INR250 crores out of INR400 crores is there, which will not be available, will not be true in the coming future. It may be a part of that, but there will be further resources and avenues because of which we are targeting to have a good NII.

Prakash — — Analyst

Okay, sir. Just like the second thing our provision for NPA, it is hovering around INR2,600 crores to INR2,700 crores. Do you see it coming down in the quarter or it will hover around same similar range?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

I will not comment about the figure, but I will share with you our principle. Our principle is if you have followed me in the last two years, I have always say that I want to have a healthy PCR and also my balance sheet should be ready for the future. In the sense, proactively, we have — we want to make more provisions. As you know, in big accounts where 15% provision is required, Canara Bank has made 100% provision. So basically if you see the provision of 2,700 crores for this one, so there are accounts where we have aggressively made provision and we continue to do that.

Prakash — — Analyst

Good, sir. And sir, like my last question, employee cost has come down by INR300 crores as compared to previous quarter. So what is the reason for this or whether the number of INR319 crore for this quarter will continue in the ensuing quarter also?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, here, actually, there are two, three points which I would like to share with you. Canara Bank is one big bank which is paying PLI to its employees in the last two years, 15 days. That is full PLI. And in the Q1, PLI amount is there, which will be paid again in the next Q1 of the next financial — next FY ’24. Whereas that PLI is not there during the current quarter. Because of which, there is a difference in staff cost. Second point is seniors are retiring and their cost is being reduced and even if we recruit new people, the cost is very less.

Prakash — — Analyst

Yes, sir. You are right.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

So moving forward — yes, sir. Going forward, staff cost will be moderate. Whereas since Canara Bank is making good profits, we want to give maximum benefits to our staff. To that extent, that amount may be increased. But it will not be significant.

Prakash — — Analyst

Very good, sir. Very good, sir. All the best, sir. I’ll come back in the queue, sir. Thank you, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, sir.

Operator

Thank you, sir. [Operator Instructions] Next question is from the line of Mr. Bhavik Shah [Phonetic]. Sir, please unmute yourself and go ahead.

Bhavik Shah — — Analyst

Hi, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Hello.

Bhavik Shah — — Analyst

So congrats on very good set of numbers.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you very much.

Bhavik Shah — — Analyst

Sir — firstly, sir, I just wanted to understand how was the liquidity situation with the bank? What would be the excess liquidity in rupees crore and how much would be the LCR as on date?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Let me share you the LCR number. LCR number is always an average number of 90 days. It is 122%. RBI requirement is 100%. So as far as liquidity is concerned, Canara Bank is maintaining very well the liquidity portion, neither surplus, not deficit. Because we want to deploy the funds effectively.

Now coming to the liquidity position. As on date, Canara Bank is not having any liquidity problem. Because as you know, we have floated one deposit scheme 666, where more than INR8 lakh deposits were opened including 666 with huge amount. So for Canara Bank resources, our liquidity is not going to a problem in the current quarter and the coming quarter.

Bhavik Shah — — Analyst

Okay. So taking that a little further. So given we are paying higher on fixed deposits compared to other SOE banks, sir, how do you — what would be the outlook of margins in the next three, four quarters? Because of repricing, can we expect a similar kind of delta over the next two, three quarters?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

See, our guidance regarding NIM is 2.90%. Today, we are at the 2.86%. So we’ll be achieving 2.90%. Now, for example, if you see my interest earned and OP, it has increased tremendously. Now, as a management, I have two points to answer. One is whether to continue with this abnormal OP without passing any benefit to my depositors or to share some of this to my depositors. I have a depositor base of more than INR10 crores and my depositors are very loyal to Canara Bank. So during the time of high inflation, we thought that we have to pass on some benefit to the depositors. This is the main reason because of which we help our — we are passing on 50 basis points more than the market to my depositors.

But I am making good money in advances also because my interest income in advances is going with 20% and I am getting non-interest income also at 13% to 14%. Fee-based income, I am getting at 18%. It is INR1,700 crores plus. So our aim is pass on some benefit to the depositors. They will be with you for lifelong. There is a concept along with maintaining the margin. This is the philosophy on which we are working and it’s working well. Thank you.

Bhavik Shah — — Analyst

Understood, sir. Sir, lastly only a couple of data-keeping questions, sir. Sir, last quarter restructured book was INR18,000 crores. On similar like-to-like basis, what would be this quarter?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Please, Majumdar Ji?

S K Majumdar — Chief Financial Officer

Sir, for RF1, our present liability is around INR4,420 crore. For RF2, it is INR12,089 crore. So both put together is around INR16,000 crore.

Bhavik Shah — — Analyst

Okay. And MSME, would it — would we get added to the…

S K Majumdar — Chief Financial Officer

Yes. MSME, we have another that is OTR of that old is another INR2,300 crores.

Bhavik Shah — — Analyst

So total would be INR18,300 crores. Sir, are there [Speech Overlap] quarter-on-quarter?

S K Majumdar — Chief Financial Officer

No. It has only come down quarter-on-quarter.

Bhavik Shah — — Analyst

So in the last quarter as in INR18,000 crores was a number, so I’m not sure if INR18,300 crores is comparable to INR18,000 crores.

S K Majumdar — Chief Financial Officer

No. You must be last we — what you are comparing maybe last quarter we told of RF1, RF2. This is not MSME, OTR we spoke of. Last quarter, the figure that you have is of only RF1 and RF2, which has come down to INR16,000 crores.

Bhavik Shah — — Analyst

Clear, sir. So thank you so much, sir. And sir, what would be the slippages from restructured book this quarter?

S K Majumdar — Chief Financial Officer

RF1, the slippages, if you take out the future, that future was also…

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, RF1, it is about 3%, excluding future. RF2, it is 13%. And it is cumulative not during the quarter. It is a cumulative one.

Bhavik Shah — — Analyst

Understood, sir. So that’s it from my side. So good luck and thank you.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you, sir. Our next question is from the line of Mr. Pranav [Phonetic]. Sir, please unmute yourself and go ahead.

Pranav — — Analyst

Hi, can you hear me?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes.

Pranav — — Analyst

Yes. So INR2,300 crore is COVID MSME and there is a INR16,000 crore RF1 plus RF2. So totally INR18,000 crores around. And out of this, 3% is slipped from the number RF1 and 13% from RF2, right?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah.

Pranav — — Analyst

Yes, sir. And sir, about SR, that is we visit — security visit will be around INR2,500 crores. Is that right?

S K Majumdar — Chief Financial Officer

Yes, sir.

Pranav — — Analyst

So out of this INR2,500 crores, is there any outstanding provision?

S K Majumdar — Chief Financial Officer

We have almost fully provided and I think only a few INR100 crores are left to be provided.

Pranav — — Analyst

Right. Perfect, sir. Sir, can you just spend some time on actually giving some color on loan growth what — which sectors they are coming? Is this retail? Is it corporate, SME, MSME? And will it continue? Is it capex related? Is it consumption related? Is it working capital related? Any color will be really helpful. Thanks a lot, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sure. Our principle is we want to maintain a ratio of 55% under RAM and 45% under corporate plus or minus 2%. So during the current quarter, our RAM is about 55% which is growing at 16.4%. Now, let me discuss regarding the RAM. We say RAM means retail, agriculture and MSME. Retail, it is growing at 12.5% and within the retail, housing is growing at 17% and we are hopeful that the growth in housing will continue to be a decent double-digit growth. Agriculture and allied activities are growing at 21% and this will be around this percentage next quarter also. MSME is at 13%. Since MSME, we are seeing lot of demand. So this 13% to 14% to 15%, we think it will be continuing. So put together again under RAM category, the growth will be about 16% to 17% to 18%, which will be a decent growth. So 55% of portfolio will be growing at a decent double-digit growth. Now coming to corporate. In corporate, we have seen traction and a very good growth in infrastructure, NBFCs, then iron and steel, then we have seen in petroleum coal products and a bit in construction and also chemicals and chemical products.

During the current quarter also, we are hoping that these sectors will be doing good and the growth momentum will be sustainable. So overall the growth we see, it will be a decent double-digit growth for Canara Bank.

Operator

Okay. Thank you, sir. Just would like to remind Mr. Pranav, could you please stop sharing your presentation because I think you are sharing a presentation? Our next question is from the line of Mr. Anandama [Phonetic]. Please unmute yourself and go ahead.

Anandama — — Analyst

Yeah. Thank you, sir, for the opportunity. So first question is on your overseas credit book and that’s where we are seeing a lot of growth across public sector banks and so for us. So what are the key reasons why we’re seeing this growth apart from my [indecipherable]?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Let me tell you. In the last 12 months, the credit book has grown by INR1.4 lac crores bank as a whole. In overseas, it has grown by just INR21,000 crores. Percentage-wise, it looks bigger. But amount-wise, since the base is very small, percentage is appears to be 85%. However, in terms of real amount, it is only INR21,000 crores. So in INR1.4 lac crores, INR21,000 crores overseas, we feel it is a normal growth and this growth is coming from A, AA and AAA rated accounts and also very good corporates who are in

India and abroad.

Anandama — — Analyst

But then what made them borrow now or what made you lend them now that basically were not doing a year back as such?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

In this overseas borrowing, there are borrowing by the banks also. Some foreign banks and also Indian Housing Finance Company also which is [Speech Overlap].

Anandama — — Analyst

From overseas branches?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes.

Anandama — — Analyst

And why would they do that? So it’s basically ECB funding that would be?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes. Exactly, sir.

Anandama — — Analyst

So how much would be ECB and how much would be buyer’s credit of the overseas book that we would have done?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Most of the portion is lending, not buyer’s credit.

Anandama — — Analyst

Okay. So secondly, we have moved to the new tax regime during the current quarter. So basically how have we done the tech, I mean, DTA adjustment? So we have knocked off the DTA from the asset book. But is there a net worth adjustment also that we need to do one? And what is tax rate that we should expect for the full year now going forward? Either it will be 25% or it will be still less than 25%?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah. We will tell you. Yes, Mr. Majumdar, our CFO will be replying this question.

S K Majumdar — Chief Financial Officer

Sir, first question — your first question is how we have adjusted this that is funded these two DTA that is around INR2,451 crore which we have told. It is out of at excess tax provision that we have made last year and first quarter of the present year. So it has been funded out of that. So it has not hit my present profit and loss account. It has not hit my profit at all.

Anandama — — Analyst

But it would [speech overlap] net worth, right?

S K Majumdar — Chief Financial Officer

No, it has your DTA reduction — DTA reduction means my capital base goes up, my CT1 goes up, my CRAR goes up that has gone up by almost 40 basis point each.

Anandama — — Analyst

That I agree. But sir, from your net worth, it should get adjusted, right? Because you’re saying that…

S K Majumdar — Chief Financial Officer

No. Sir, it will only reduce my net worth if it is a charge on my profit. It is a charge on my profit which has been funded out of tax provision, additional tax provision more than requirement, which I had made last year and the first quarter of the present year, which has neutralized it. I’m — I’ll explain you. But if you want to know a bit more, last year, I had an unadjusted accumulated loss of around INR18,000 crore. So technically, I need not pay any tax last year. But I made a tax provision of around INR1,500 crore plus last year. And this year, when I started the year, I had a net — that accumulate loss of around INR8,000 crore. So this year also up to — this September I need not pay any tax. But still in the first quarter, I made a provision of around INR900 crores, which was adequate for me to fund this DTA. So that is the reason my profit and loss is not hit, which you said that my net worth would have been eroded by that type by that amount is not eroded because it was already funded.

Anandama — — Analyst

Okay. So what’s the tax, sir that we should expect for the full year?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Here, let me add something.

S K Majumdar — Chief Financial Officer

We will move to 25% from 35%, 34.9%.

Anandama — — Analyst

Yeah, that’s [speech overlap].

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

This particular migration from higher tax to lower tax, we are working for the last one and a half years. It is not today we have taken the decision for this in order to avoid the hit or the reduction in the net worth. We have made excess provision in the last year itself for the tax and also in the first quarter of this financial year. Knowing very well that this money will be required when we migrate to the lower tax regime. It is a well-calculated move, which is paying dividend today.

Anandama — — Analyst

Sir, I understand the tax balance sheet adjustment. But how does that affect basically the accounting part of it? So you have knocked off from the assets, the DTA on the library side also that should have been some adjustment to that amount. So whether it was sitting into other liabilities, some provisions that you would have made?

S K Majumdar — Chief Financial Officer

No. That provision of tax of equal amount has been reversed.

Anandama — — Analyst

Okay. Sir, I’ll take it offline.

Operator

Can you please come back in queue?

Anandama — — Analyst

Yeah, sure. I’ll come back in the queue.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah, please.

Operator

Our next question is from the line of Mr. Saket Kapoor [Phonetic]. Sir, please unmute yourself and go ahead. Yeah. Namaskar, sir and thank you for this opportunity.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Namaste, sir.

Saket Kapoor — — Analyst

Yes, sir. So I will just club out — club a bunch of my questions in the publicity of time. Firstly, sir, our EPS for H1 has been INR27 and if — correct me, sir, we were guided INR40 for the full year. So can we expect an upward guidance since you are — since the likelihood of breaching INR40 — should be by the next quarter itself we’re buying unfortunate circumstances? My first point. And secondly, sir, how have the hardening of this GSEC rate, the

Government securities, the 10 year on benchmark have affected our treasury portfolio? And going ahead, sir, if you could give us the trajectory of how the NIMs are going to shape up? And then I have one more follow-up, sir. Please your answer. Thank you.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, regarding your first question, EPS, today, we are already at INR55.22. We have already crossed INR40, which we have given the guidance. And we are hopeful that this will be improving further going forward. So that INR40 is now history. Now regarding the NII, the momentum which we are observing will be maintained going forward. Because the way in which we are seeing the demand for the credit and also from the good corporates who are ready to afford a bit higher rate of interest. So NII, we are going to maintain. There will not be an issue regarding the NII. Regarding the treasury, yes. As you know, in Q1, we made good money in treasury because of the proactive actions taken by my treasury.

This quarter, we did not have much impact regarding the depreciation on our treasury income. However, the treasury income is a bit less because of the existing conditions. Next quarter, we are hopeful that the situation will improve and we will be in a position to make some money from the treasury also. However, we don’t see any depreciation as far as the portfolio is concerned. At the most, there may be a depreciation of INR200 crores to INR300 crores, which is very negligible as far as my balance sheet is concerned.

Saket Kapoor — — Analyst

Sir, on the EPS front, are you analyzing the first half number, sir? Because if you look at…

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

I’ll give you the two EPS. One is quarter-wise, it is INR55.22. And for cumulative for six months, it is INR50.27.

Saket Kapoor — — Analyst

Okay, sir. Correct me here, sir, when I look at your reporting numbers, we find the EPS at consolidated for this first half at INR27, INR26.93. So where are we getting this INR52 number, sir? I am referring to Page Number 4 of the slide.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

It is on — we have given on Page Number 21, EPS annualized.

Saket Kapoor — — Analyst

Sir, you are analyzing the first half number. That is what I’m asking, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah.

Saket Kapoor — — Analyst

Because the performance will vary, sir. Performance may vary also, sir. It is — is it going to be a granular — granular numbers going ahead also, sir? Can we look forward for that?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

See, our only commitment is we want to do better than what we did earlier. That’s the only target for us.

Saket Kapoor — — Analyst

Correct, sir. Last point is on the, sir, what portion of our portfolio or the loan book is on floating rate and how much is on the fixed rate part? So with the increase in the REPO rate, how is the incremental — NIMs are incremental in interest margin is going to be and your guidance on the net interest margins are shipping right in percentage terms?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

As on date, we don’t have any advances on fixed rate. All are floating rate.

Saket Kapoor — — Analyst

100% book is on floating?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes. And then…

Operator

Saket sir, I would request you to please come back in queue.

Saket Kapoor — — Analyst

Yes, sir. I’m in the queue. Only I’m listening to [speech overlap] and then I’ll come…

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

And I can only say that whatever ratios we have given this time, next time, we’ll try to better those ratios.

Operator

Thank you, sir. Our next question is from the line of Mr. Ashok. Please unmute yourself and go ahead.

Ashok — — Analyst

Yeah. I think you had given me this opportunity earlier also, but there were some technical glitch. Sir could not hear me and I could not hear him. Now…

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Please [speech overlap].

Ashok — — Analyst

Yeah. Sir, a lot of the queries and questions have been answered by you very calmly and with a great reassurance. I have just one- the recent development with the — by the RBI on the rating agencies giving guidance them to rate the corporates, especially the large accounts with the names of the banks for which this limit is being rated. Sir, have you gone through that and whether — can I seek some clarifications on that from you? Sir, how is it going to be impacted?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

See, we have come across this one. And still, we are also I can say studying because the time is there. And for further clarifications, I have my CGM risk who has the rating. He will be responding this. Please Mr. Rao

Ashok — — Analyst

So sir, my question is basically that the most of the time when the loan is at the sanction stage, that time the ratings have been called for. I mean, the previous rating or rating of the company. By that time, it is not clear that which bank is going to sanction the loan out of the various banks where the loans are applied. So generally, the rating is for an amount that this is the amount which we are seeking, this is the amount which we are going to see, say INR1,000 crore, INR2,000 crore. That time the names of the banks may or may not have been known. Only the existing banks who have given the credit, their names can be given. But not the bank which is assessing the proposal.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

You are perfectly correct. That’s why still there is time. So we are also working and discussing internally and we will be giving the feedback.

Ashok — — Analyst

Okay, sir. So we’ll wait for clarification from you and the banks also and the RBI also. Sir, my second observation and some answer from you that we have a very large number of subsidiaries and associates. I think we have eight subsidiary and five associates and a lot of money have been — has been invested in those subsidiary and that whereas when you see the operating profit, the console profit, it’s just INR75 crore, INR80 crore more than your standalone profit. And if you look at the net profit, it’s again the same, like kind of this. So ultimately, at the end of the day, are we just banking on the valuations of these companies or their products and this thing or we do we want to bring in something in our profit and loss account in our balance sheet also?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Very good question. Let me tell you. For example, Can Fin Homes. They are doing very good profit OP and NP. And going forward, we are confident that this particular subsidiary or associate is going to perform very well. Now coming to Canara HSBC, we are seeing a very good traction in Canara HSBC as far as the business is concerned. And going forward, evaluations are going to be very good when they come out for IPO. Canara Robeco is another best mutual fund in India, which is giving good returns and excellently managed. So these are all the jewels for Canara Bank. Today, profit in terms of comparison to parent Canara Bank may be less. But going forward, these companies or subsidiaries are going to give huge returns. That is why we are not selling the stake in these companies. And regarding Grameena Banks, I have four. For example, Andhra Pradesh Grameena Bank. It started making INR326 crores profit. And same way I have other Grameena Banks, like Kerala Grameena Bank. It is making INR129 crores profit. So going forward, these things are going to give huge dividends to Canara Bank.

Operator

Okay. Thank you, sir. Our next question is from the line of Ms. Mahrukh [Phonetic]. Please unmute yourself and go ahead.

Mahrukh Adajania — Edelweiss — Analyst

Yeah. Hello, sir. Congratulations.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, ma’am.

Mahrukh Adajania — Edelweiss — Analyst

Yes, sir. So I had just a couple of questions. So firstly, I just wanted to foresee on you said that you’d better all your parameters — try to better all your parameters next quarter. How do you view your margins? Because you also said that you have to pass on something to depositors too so that they stay loyal to you. So how do you view your margins going ahead? Do you think they peak here or there is scope for improvement, given MCLR repricing? What’s your view on margins in the next one to two quarters?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, regarding margins going forward, the margins are going to increase. As we said, NIM, our guidance is 2.90%. Today, we are at 2.86%. So margins will increase. And the thing which I have said that we have to pass on some benefit to the depositors, that will help the bank in the long run to improve the margins. See, there is a demand for the deposits in the market. Because we don’t see the liquidity, which was available four months ago, five months ago today. Under this scenario and also taking into consideration the present inflation which is there, it is justifiable and also required that you should pay interest which will help the depositors to take care about the

Inflation and also to continue with Canara Bank and running the margins. Now, the lending is being done at a higher rate and people are ready to take well-rated companies. So for Canara Bank, margin will not be a issue. The outcome will be my depositors will be happy. They continue to bank with me and also deposit money in my bank. It will ultimately lead to very good liquidity position for Canara Bank, which I will be deploying in the credit. As you have seen during the current quarter, YOY growth is about 20%. To maintain a decent double-digit growth, you need resources, deposits and for that, you have to pay a bit more also.

Mahrukh Adajania — Edelweiss — Analyst

Sir, it’s a very well explained. And so I just have one more question dwelling a bit more into what Anandama was asking. So you know this question on international loans and where they have been learned keep coming up because what has happened is it’s a coincidence that all PSU banks have started showing growth in international loans at the same time. So there is no lead-lag or any such thing, so except Baroda which was anyway strong in international loans. Everyone has up the lending just in the last two to three quarters. Part of it will be exchange depreciation. But if you could have a rough breakdown on how much growth has come through exchange, how much is to overseas banks that we talked about and how much is to overseas corporates and how much is to Indian corporates? So any such broad classification?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, if you see the increase in figure in overseas, it is only INR21,000 crores, which is not a big amount. And this INR21,000 crores, INR4,000 crores to INR5,000 crores has gone to the banks. We have financed to the banks. And remaining is for well-reputed high rated corporates.

Mahrukh Adajania — Edelweiss — Analyst

And these are international banks?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes. And one Indian Housing Finance bank is also there.

Mahrukh Adajania — Edelweiss — Analyst

Got it.

Operator

Thank you, ma’am.

Mahrukh Adajania — Edelweiss — Analyst

Thank you.

Operator

Our next question is from the line of Mr. Rushab Inderkar [Phonetic]. Please unmute yourself and go ahead.

Rushab Inderkar — — Analyst

Hi, sir. Congratulations for the good…

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you.

Rushab Inderkar — — Analyst

Sir, considering the increase in deposit rates and there’s 666 scheme that have come up, what is the expected growth in deposits for next four — three to four quarters?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

I can say next two quarters — next two quarters, there will be a decent deposit growth of double digits. And the deposits, as I said, in the last 12 days, we have mobilized more than INR8 lakh fixed deposits, which are going to stay with Canara Bank and these are all retail deposits. [Technical Issues]

Operator

Apologies. There were some technical glitch and they were disconnected. We’re trying to resolve. Just hold on for a second. Sir, please admit yourself, MD, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Hello.

Operator

Yes, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, are you able to hear?

Operator

Rushabh?

Rushab Inderkar — — Analyst

Yeah, sir. We can hear you now.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Regarding the deposits just I was explaining, it got disconnected. So we are going to see a decent double-digit growth in deposits also in the current quarter that is Q3 FY ’23 and also Q4 FY ’23. Because we have already mobilized more than INR8 lakh fixed deposits from various customers, which are all retail. So this money is going to stay with Canara Bank. So there will be a very decent deposit growth.

Rushab Inderkar — — Analyst

And this additional deposit so that we are taking in, the cost of those deposits are typically less than the borrowings? Or is it higher? Just wanted to understand.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

We are always conscious about the margin to be earned. So always we lend at a rate taking into consideration of our margins also and the 7% is only for 666. Whereas for other deposits, it is 2.5%, 3.5%, 4%, 5%. Different rates are there. So it’s not that all the deposits are at 666. 666, actually, it has created a wave in the market that deposit money in Canara Bank.

Rushab Inderkar — — Analyst

Got it. Okay. And sir, last one. Wanted to understand as you mentioned the entire advances book of Canara Bank is floating. So just wanted to confirm if even the commercial advances are floating or only the retail advances we were talking about?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

No. All advances, except FDR fixed [indecipherable] fixed deposit we give, all other are any of the floating rates only. No fixed rates we have given.

Rushab Inderkar — — Analyst

Okay, sir. Thank you, sir.

Operator

Thank you, sir. Our next question is from the line of Mr. Jay Mundra [Phonetic]. Please unmute yourself and go ahead.

Jay Mundra — — Analyst

Yeah. Hi, sir. Good evening and thanks for the opportunity.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Good evening, sir.

Jay Mundra — — Analyst

Sir, our NIM’s guidance of 2.9%, is it for FY ’23? Or this is like exit quarter FY ’23, I mean, fourth quarter?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, it is for March — 31st March ’23.

Jay Mundra — — Analyst

For the full year?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Full year.

Jay Mundra — — Analyst

Right. And Sir, the capital number that we have shown, this includes the interim first-half PAD number, right?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, excluding 20%.

Jay Mundra — — Analyst

Excluding 20%, right, which is okay. And then the- sir, if you can share the slippages breakup for this quarter of around…

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, out of this INR3,500 crores, INR1,200 crores is under agriculture, small ticket loans. INR1,300 crores is under MSME. INR600 crores is under retail. And leftover INR400 crores is other accounts.

Jay Mundra — — Analyst

Right. And last question, sir. Is there any one-off in the net interest income line item? Because while you have clearly shown a very huge loan growth, the interest on advances have also gone up significantly. So is there any one-off or any NPA recovery which is also coming in interest advances line? Or this is like just as usual?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

No, sir. This is all the growth in credit and also the increase in interest rates, which you have implemented in the last three months that has given this increase in interest income, which is about 20% YOY. No one of instance.

Jay Mundra — — Analyst

Right, sir. And if you can, we used to share the SME 1 and 2 at overall bank level and the reason I’m asking, sir, is in this quarter also, large part of the slippages have come from below INR5 crore accounts, right? So if you can help us with the SME 1…

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah, [speech overlap].

Jay Mundra — — Analyst

Sure. Yeah, sir. That is — yeah. Well, thank you so much, sir. All the best.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, sir.

Operator

Thank you, sir. With the giving in mind the time, we’ll like this was the last question. Hand over the mic to MD sir for his last closing comments.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

First of all, from Canara Bank side and from the management side, we thank the investors and also the analysts who are very cooperative to Canara Bank and bringing out the actual position in the market. Second one is as we committed that each and every staff in Canara Bank is committed to the bank and the growth momentum will continue in the coming quarters also and the growth is not in one sector or in one region. It is spread over on agriculture, MSME, retail, corporate, all those things. So we are of the strong opinion and confidence that the growth will continue in the current quarter also. With these words, I thank one and all.

Operator

[Operator Closing Remarks]