‘Our profitability is better than many bigger industry peers’

CANARA Bank reported a net profit of %4,774 crore in Q2 FY26, up 19% year-on-year, driven by improved asset quality and growth in advances. Yet the bank’s net interest income fell by 2% and net interest margin fell to 2.52%.

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The bank’s MD and CEO K Satyanarayana Raju in an interaction with Dipak Mondal of New Indian Express explains these incongruities. Excerpts:

Q2 profit has gone up by about 18%, but your net interest income has contracted by 2%, and margins have fallen. How would you sum up your Q2 performance?

The Q2 performance is broadly at the expected level. You are right —there’s a 2% cut in net interest income. This is because when the RBI reduced repo rate by 100 basis points, 46% of our portfolio, linked to the repo rate, had to be repriced immediately. However, our term deposits up to June 8 were garnered at higher interest rates — mostly for one year or 444 days — so those remain fixed. That creates a natural lag when rates fall; banks have to absorb some burden for three-four quarters. That said, if you look QoQ, our net interest income has improved by ₹132 crore between June and September, and our cost of deposits has come down by 9 basis points.