Hold Canara Bank;target of Rs 177: KRChoksey

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26 Aug, 2025 12:21

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KRChoksey's research report on Canara BankBusiness re-organization and RBI’s AQR review dented the Q3FY16 earnings performance of Canara Bank. While the business consolidation exercise continues to deter the top-line, the focus on built-up of staunch liability franchise with increased thrust on both asset (retail loan traction) and liability side (CASA augmentation) should aid improved business performance ahead. For now, the weak liability franchise and persistent pressures on asset quality continue to haunt the bank’s performance. Maintain HOLD.Canara Bank continues to disappoint on the earnings front and Q3FY16 bottom-line stood abysmally low. While the bank engages itself into re-organization exercise consolidating its balance sheet, the earnings pressures stand imminent even as we foray into FY17 ahead. The AQR review and the much elevated stressed asset ratio prompt us to maintain negative near-term outlook. We reckon the long term business strategy to focus on retail franchise traction laid out by the new MD and CEO appears promising, the worries still do not stand priced in. While we maintain HOLD recommendation on the stock, we revise our target price downwards to INR 177 (earlier INR 289) so as to accommodate the sharp earnings cut, lower business growth and higher asset quality pressures. We value the bank at 0.6 x P/ABV FY17E and roll over FY18 estimates valuing the bank at 0.6x P/ABV FY18E. At CMP, the stock trades at 0.5 FY17E P/ABV.For all recommendations, click here Disclaimer: 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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