Buy Canara Bank; target of Rs 340: 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 a healthy performance with 19% YoY NII growth (3% beat) driven by 8bp margin expansion in 2QFY23. This coupled with healthy treasury gains and traction in fee income drove overall earnings. The bank has further adopted the new tax regime and provided deferred tax worth INR24.5b. Tax rate for 2QFY23 thus came in at 22.7%.  On the business front, CBK witnessed strong demand momentum as it clocked 6% QoQ/21% YoY growth in advances in 2QFY23. Growth was led by Corporate and Agri segment which grew 6% QoQ. Deposits, on the other hand, grew 1% QoQ led by term deposits as CASA deposits stood flattish.  Fresh slippages were stable at INR39.5b, while healthy recoveries and upgrades of INR34b along with higher write-offs worth INR28b led to improvements in asset quality ratios during the quarter. We increase our PAT estimates by 17%/19% for FY23/24 to account for higher NII, other income, loan growth and lower tax rate.

Outlook

We expect CBK to deliver FY24E RoA/RoE of 1.0%/16.2%, respectively. Maintain BUY with a revised TP of INR340 (premised on 0.8x FY24E ABV).

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Canara Bank - 211022 - moti