Buy Canara Bank; target of Rs 410: Motilal Oswal

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Motilal Oswal's research report on Canara Bank

Canara Bank (CBK) reported a healthy 3QFY23 with 24% YoY NII growth (8% beat) driven by 19bp QoQ margin expansion and lower provisions that drove its overall earnings. Other income though remained modest. On the business front, loan growth remained healthy driven by corporate, retail and Agri segments. However, deposits growth was modest led by term deposits, while CASA deposits declined sequentially. Fresh slippages moderated, which coupled with healthy recoveries and upgrades/write-offs resulted in improvements in asset quality ratios.

Outlook

We raise our PAT estimates by 5% each for FY23/24 and 4% for FY25 to account for higher NII and lower provisions. We expect CBK to deliver FY25E RoA/RoE of 1.1%/17.5%, respectively. Maintain BUY with a revised TP of INR410 (premised on 0.9x Sep’24E ABV).