Buy Canara Bank; target of Rs 120: Emkay Global Financial

buy

Emkay Global Financial' research report on Canara Bank

Canara Bank posted a 20% beat on earnings at Rs50bn/1.3% RoA, mainly aided by treasury gains/recovery from written-off loans and provision reversal on SR investments. Credit growth outpaced expectations at 12.6% YoY/2.5% QoQ, while deposit growth was strong at 11% YoY/6.4% QoQ. This, coupled with higher loan yields, led to nearly flat NIMs at 2.7% after a steady fall for the past two quarters, akin to BOB/PNB. The bank’s headline asset quality continues to improve, with GNPA ratio down by 40bps QoQ to 2.9% due to higher write-offs, while specific PCR surged by 258bps QoQ to 77%.

Outlook

We revise up FY26-28E earnings by 5-7%, while we expect the bank to deliver a healthy 0.9-1.1% RoA over FY26-28E We retain BUY with unchanged TP to Rs 120, valuing the standalone bank at 0.9x Mar-27E ABV and subs at Rs6/sh.

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Canara Bank - 09052025 - emkay