Buy Canara Bank; target of Rs 280: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Canara Bank

Canara Bank (CBK) reported mixed operating performance with NII growing 25% YoY (5% miss); however, healthy treasury gains enabled in-line growth in total revenue. Margin improved 10bp QoQ to 2.9% while PPoP grew 19% YoY (Core PPoP rose 13% YoY). On the business front, CBK reported a marginal 2% QoQ growth in advances after a strong 7% sequential growth in 3QFY22, led by revival in corporate loan book. In 4QFY22, corporate book dipped marginally while growth came on the back of improved traction in RAM segments – Retail, Agri and MSME. Fresh slippages stood elevated at INR47.4b, while healthy recoveries and upgrades of INR29.8b along with higher write-offs worth INR29.9b led to improvements in asset quality ratios. GNPA/NNPA improved 29bp/21bp QoQ to 7.51%/2.65%, respectively. Vehicle loans and agri book saw higher GNPA while other segments witnessed moderation in GNPA.

Outlook

Further, SMA overdue declined to 1.53% from 1.76% in 3QFY22, while restructured portfolio improved marginally to 2.77% of loans. We expect CBK to deliver FY24E RoA/RoE of 0.7%/~13% and value the stock at INR280 (premised on 0.8x FY24E ABV). Reiterate BUY.

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