Buy Canara Bank; target of Rs 440 : Motilal Oswal

Motilal Oswal's research report on Canara Bank

Canara Bank (CBK) reported a healthy quarter, with PAT up 43% YoY to INR36.1b (in line), driven by lower provisions. NII grew 20% YoY (in line), while margins moderated 5bp QoQ to 3.0%. On the business front, loan book grew ~13% YoY (4% QoQ), driven by healthy traction in retail and corporate loans. Deposits grew 9% YoY (3% QoQ) to INR12.3t, led by 11% YoY growth in term deposits. Asset quality ratios have improved and the management expects to further reduce net NPAs at an accelerated pace. SMA book moderated to 0.7% in 2QFY24 vs. 1.1% in 1QFY24.

Outlook

We revise our earnings estimates slightly to factor in lower provisions and expect CBK to deliver FY25 RoA/RoE of 1.1%/17.6%. We reiterate our BUY rating with a TP of INR440 (0.9x FY25E ABV).