Hold Canara Bank; target of Rs 310: Religare

Religare's report on Canara BankCBK’s Q2 PAT slumped 16% YoY to Rs 5.3bn on a 49% YoY spurt in provisions. While stressed asset formation declined 20% QoQ to Rs 33bn, fresh slippages remained elevated at Rs 22bn. CBK did not sell loans to ARCs but refinanced Rs 5bn of loans under the 5:25 scheme. The bank evoked SDR on four accounts worth Rs 9.9bn and has three accounts of Rs 7bn in the pipeline. Loan growth was muted at 4% YoY and NIMs stable QoQ at 2.2%. Maintain HOLD with a Sep’16 TP of Rs 310 (Rs 325 earlier).ValuationsWe value CBK using the two-stage Gordon growth model, and adjust our book value for net NPAs and assume a 25% hit on outstanding restructured assets. We pare our FY16/FY17 estimates by 8-9% on lower loan growth and higher credit  costs, and maintain HOLD with a revised Sep’16 TP of Rs 310 (Rs 325 earlier), says Religare research report.For all recommendations, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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