Canara Bank Shares Soar 4% to 15-Year High After Q2 Profit Jumps 19% and Asset Quality Strengthens
Mumbai, October 30, 2025: Shares of Canara Bank surged over 4% in Thursday’s trading session, touching a near 15-year high after the state-run lender reported a strong set of numbers for the second quarter of FY26. The sharp rise in profit and significant improvement in asset quality drove investor optimism, pushing the stock to fresh multi-year highs.
At 1:30 p.m., Canara Bank shares were trading at ₹134.25 apiece, marking a 4% rise from the previous close and its highest level since 2010. The stock has now climbed over 71% in just seven months, after hitting a 52-week low of ₹78.60 in March this year.
Q2 FY26 Results: Profit Rises 19% Despite NII Dip
The public sector lender reported a net profit of ₹4,774 crore for the quarter ended September 2025, registering a 19% year-on-year (YoY) increase compared to ₹4,014 crore in the same period last year.
While profit growth remained robust, net interest income (NII) — the difference between interest earned and interest paid — saw a modest 2% YoY decline to ₹9,141.19 crore. Despite this, Canara Bank managed to maintain strong profitability thanks to better cost control, lower slippages, and an improvement in asset quality.
The lender’s net profit margin rose to 12.37% in Q2 FY26, up from 11.56% in the same period last year. Sequentially, the margin showed a slight dip from 12.48% recorded in the first quarter (April–June 2025).
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Asset Quality Sees Remarkable Improvement
One of the most positive takeaways from the quarterly results was the continued improvement in asset quality. The gross non-performing assets (NPA) ratio dropped sharply to 2.35% in Q2 FY26, from 3.73% in Q2 FY25, indicating better credit discipline and recoveries.
Similarly, the net NPA ratio improved to 0.54%, compared to 0.99% a year ago — placing Canara Bank among the top-performing PSU banks in terms of asset quality.
The slippage ratio — a measure of fresh bad loans — also improved by 24 basis points, coming in at 0.76% during the September quarter.
The bank’s credit cost eased to 0.68%, reflecting reduced provisioning pressure, while total provisions stood at ₹3,814 crore, up nearly 5% YoY. The return on assets (ROA) improved to 1.12%, signaling better operational efficiency.
Analysts noted that the improvement in Canara Bank’s asset quality highlights its strong underwriting practices and recovery strategies. The lender’s ability to reduce NPAs consistently, even in a rising interest rate environment, underscores its resilience among public sector peers.
Market Reaction: Strong Momentum in PSU Bank Stocks
Following the release of the results, Canara Bank shares extended their rally to touch a fresh 52-week high of ₹134.25, nearly doubling investor wealth over the past year. The stock has been one of the best-performing PSU bank stocks in 2025, outpacing peers such as Punjab National Bank, Union Bank, and Bank of Baroda.
In the last five trading sessions, Canara Bank’s stock has gained more than 5%, while over the past six months, it has surged nearly 36%. The impressive performance has also attracted renewed interest from institutional investors betting on PSU banking sector growth, driven by improving credit demand, higher margins, and a stable macro environment.
The stock currently trades at a price-to-earnings (P/E) ratio of over 7, which remains relatively attractive compared to private-sector peers, leaving room for further re-rating, according to analysts.
Analysts’ Take: Strong Growth Outlook with Cautious Optimism
Market experts remain optimistic about Canara Bank’s long-term prospects, citing its improving balance sheet, consistent profitability, and strong capital position.
“Canara Bank’s results reflect sustained operational strength. The improvement in asset quality and return ratios is encouraging, and despite a marginal dip in NII, profitability remains robust,” said R. K. Singh, Senior Banking Analyst at Motilal Oswal Financial Services.
He added that the lender’s consistent improvement in gross and net NPAs could pave the way for credit rating upgrades and better investor sentiment in the coming quarters.
However, analysts also cautioned that maintaining margins amid a volatile interest rate environment would be key to sustaining profitability in the second half of FY26.
Broader Market Context: PSU Banks in Focus
The rally in Canara Bank shares comes at a time when public sector banks (PSBs) have been reporting strong earnings growth on the back of improved asset quality, rising loan demand, and better cost efficiencies.
The Nifty PSU Bank index has gained nearly 25% year-to-date, outperforming the broader market indices, with Canara Bank, Bank of Baroda, and Indian Bank leading the gains. Analysts believe that the government’s focus on infrastructure development, retail credit expansion, and digital banking transformation will continue to support PSU banks’ earnings momentum.
Outlook: Canara Bank Positioned for Continued Growth
Looking ahead, Canara Bank’s management aims to sustain double-digit growth in advances, improve fee-based income, and strengthen its digital banking footprint. The steady improvement in return ratios, coupled with strong capital adequacy, provides the bank a solid foundation for future expansion.
With profitability on the rise and bad loans under control, Canara Bank appears well-positioned to capitalize on India’s robust economic growth and rising credit penetration.
