Buy Canara Bank; target of Rs 570: Motilal Oswal

Motilal Oswal's research report on Canara Bank

Canara Bank (CBK) reported 3QFY24 standalone PAT at INR36.6b (up 27% YoY, in line), driven by lower provisions. NII grew 9.5% YoY (in line), while margins improved 3bp QoQ to 3.03%. Other income grew 8% YoY to INR43b (down 7% QoQ, 6% miss). Opex grew 23% YoY to INR69.1b (17% QoQ growth, 8% beat). PPoP, thus, declined 2% YoY (7% miss). The C/I ratio rose to 50.4% due to wage revisions at 17%. On the business front, the loan book grew 13% YoY (3.2% QoQ), driven by healthy traction in retail and corporate loans. Deposits grew 8.5% YoY (2.5% QoQ) to INR12.6t, led by 14% YoY growth in term deposits. The CASA ratio, thus, moderated 50bp QoQ to 31.7%. Asset quality ratios improved significantly, with credit costs falling below 1%. Fresh slippages stood at INR26.97b vs. INR29.87b in 2QFY24. RoA/RoE stood at 1.01%/21.95%.

Outlook

We broadly maintain our EPS estimates and expect CBK to deliver FY25E RoA/RoE of 1.1%/19.5%. Reiterate BUY with a TP of INR570.