Buy Canara Bank; target of Rs 135: Motilal Oswal

Motilal Oswal's research report on Canara Bank

CBK reported 1QFY26 standalone PAT of INR47.5b (15% beat), up 21.7% YoY/down 5% QoQ, aided by a healthy beat in other income. NII declined by 1.7% YoY/4.6% QoQ to INR90b (in line). NIMs declined by 18bp QoQ/35bp YoY to 2.55%. Loan book grew 13.4% YoY/2.3% QoQ to INR10.7t, while deposits increased by 9.9% YoY/0.7% QoQ. CASA deposits declined by 4.6% QoQ (up 3.7% YoY). As a result, CASA ratio declined 161bp QoQ to 29.6%. Slippages fell 19.8% QoQ and 35.1% YoY to INR21.7b. As a result, GNPA/ NNPA ratios improved by 25bp/7bp QoQ to 2.69%/0.63%. PCR increased by 608bp YoY/40bp QoQ to 77.1%. We increase our earnings estimates by 11-13%, factoring in better other income and lower provisions. We estimate CBK to deliver FY27E RoA/ RoE of 1.1%/19%. Reiterate BUY with a revised TP of INR135 (based on 1.0x FY27E ABV).

Outlook

We increase our earnings estimates by 11-13%, factoring in better other income and lower provisions. We estimate CBK to deliver FY27E RoA/ RoE of 1.1%/19%. Reiterate BUY with a revised TP of INR135 (based on 1.0x FY27E ABV).