Reduce Canara Bank; target of Rs 108: Dolat Capital

Dolat Capital's research report on Canara Bank

Canara Bank reported a loss of Rs 32bn in 4QFY20 led by higher loan loss provisions as the bank provided more for existing NPAs, raising its PCR by 900bps QoQ to 51%. Despite asset classification benefit extended to Rs20bn of loans, slippages at 3.7% were elevated during the quarter. Moratorium at 17% of advances is lower than peer banks, however the approach to moratorium number makes it less comparable to peers Sub-par core earnings (PPoP/assets at 1.5%), elevated credit costs, and focus on merger could continue to pressurize earnings over the medium term.

Outlook

We have a REDUCE recommendation on the stock with a TP of Rs108, valuing it at 0.6x of FY22E P/ABV.

Canara Bank 26062020-moti