Accumulate Canara Bank, tgt Rs 185: Emkay Global

Emkay Global Financial Services research has maintained accumulate rating on Canara Bank with target price of Rs 185 in its July 22, 2008 report. "Canara Bank (CNBK) reported a net profit of Rs 1.2 billion, below our expectations, driven by higher MTM losses during the quarter. However on the operating level the bank surprised us positively with better than expected performance. The NII grew by 14%yoy to Rs 10.2 billion (positive growth after four quarters) vis-à-vis our expectations of Rs 9.2 billion. The growth mainly led by expansion in NIM’s which benefited from shedding of high cost deposits. The other income remained flat at Rs 3.7 billion marginally lower than our expectations due to trading losses and muted growth in commissions.

We had REDUCE rating on the stock driven by three factors a) poor deposit profile b) poor provis ion cover and c) higher AFS bond portfolio. The bank has resolved the issue of high cost deposits and we believe that bond yields from current level are unlikely to go up further. Besides, our target price leaves around 10% upside from the current level. We are upgrading our recommendation from REDUCE to ACCUMULATE. At the current valuations, the stock is quoting at 4.5x FY10E EPS and 0.8x FY10E ABV. We believe that the valuations of the stock are reasonably attractive looking at average RoE of 16.2% over FY08-10E." according to Emkay Global report.  

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