Buy Canara Bank; target of Rs 400: Motilal Oswal

Motilal Oswal's research report on Canara Bank

Canara Bank (CBK) reported a mixed quarter with PAT up 91% YoY to INR31.7b (in line), driven by higher ‘other income’ even as NII/PPoP saw a miss. NII grew 23% YoY (8% miss), while margins expanded marginally by 2bp QoQ to 3.07%. On the business front, loan growth sustained its momentum at ~18% YoY, while deposits grew 9% YoY (1.4% QoQ), aided by higher growth in CASA deposits. The asset quality ratios have shown improvement due to moderation in fresh slippages and the combined effect of healthy recoveries, upgrades and write-offs.

Outlook

We revise our estimates slightly to factor in lower provisions and expect CBK to deliver FY25E RoA/RoE of 1.1%/17.8%. We reiterate our BUY rating with an unchanged TP of INR400 (premised on 0.9x Sep’24E ABV).

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