Hold Canara Bank; target of Rs 247: SPA Securities

SPA Securities' report on Canara Bank

Canara Bank reported NII of INR 32.8bn (-15% q-o-q & 18% y-o-y) largely due to one-off lumpy interest recovery of INR 5.2bn from resolution of Bhushan steel in Q1 FY19. Net total Income stood at INR 48.3bn (-15% q-o-q & 2% y-o-y) largely due to lower other income of INR 15.55bn (-15% q-o-q & -20% y-o-y). Elevated provision of INR 28.4bn (10% q-o-q & 31% y-o-y) and a tax write back of INR 8.1bn resulted positive PAT of INR 3bn (6% q-o-q & 15% y-o-y). Loan book for the quarter stood at INR 4.1tn (14% y-o-y & 6% q-o-q) while GNPA / NNPA stood at 10.6% / 7.0% respectively.

Outlook

Considering the above risks, we have reduced our target multiple to 0.5x from 0.6x P/BV FY20E and revise our rating from BUY to HOLD with a TP of INR 247 based on SOTP (0.5x P/BV FY20E for the bank and INR 7 per share for other investment).