Hold Canara Bank; target of Rs 450: Religare

Religare's report on Canara Bank (CKB)

"CBK reported disappointing Q2FY15 results with below-expected NII and operating profits, leading to a lower-than-estimated PAT of Rs 6.3bn (-22.3% QoQ; flat YoY). Asset quality remained under pressure with massive slippages of Rs 31.8bn (4.5% vs. 4.2% in Q1FY15). Fresh restructuring too was elevated at Rs 9.3bn. We believe CBK’s weak operating performance, higher stressed asset formation and a low CET I (7.1%) would continue to weigh on the stock. Maintain HOLD with a TP of Rs 450", says Religare Capital research report.

"Despite higher write-offs and upgrades, headline asset quality continued to weaken due to a sharp rise in fresh slippages to Rs 31.8bn (4.5% vs. 4.2% in Q1FY15), leading to higher GNPL additions at Rs 10bn. About 64% of total incremental slippages stemmed from MSE and large industries. While incremental restructuring moderated QoQ, it remained elevated at Rs 9.3bn, taking the total outstanding restructured book to Rs 246bn (7.8% of loans)."

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