Canara Bank, a state-run bank and a part of Rakesh Jhunjhunwala’s portfolio, delivered a strong performance in the recent quarter, surpassing earnings expectations. The bank’s success was driven by higher ‘other income’ and reduced provisions.
Notably, the net interest income (NII) experienced a significant growth of 28 percent compared to the previous year, meeting expectations. However, the margins saw a slight moderation of 2 basis points, reaching 3.05 percent, in the quarter-on-quarter (QoQ) comparison.
In terms of business, Canara Bank’s loan book expanded by 15 percent YoY and 3 percent QoQ, while deposits grew by 7 percent YoY and 1 percent QoQ. The bank’s asset quality ratios improved, and the management remains optimistic about further reducing net non-performing assets (NPA) at a faster pace.
However, the Special Mention Account (SMA) book saw a QoQ increase of 51 percent, amounting to Rs 9,890 crore. Despite this, several brokerages recommended price targets for the bank’s shares, with some predicting up to 25 percent upside potential, setting the target price as high as Rs 425.
Motilal Oswal, which rates Canara Bank as a ‘Buy’ with a target price of Rs 425, noted stable margins and a steady improvement in asset quality.
According to their research report, the bank’s loan growth was driven by Corporate, Retail, and Agri segments, and the outlook remains positive.
Although there were some increases in slippages and SMA book sequentially, overall asset quality ratios displayed significant improvement.
Emkay, on the other hand, maintained a ‘Hold’ rating on the stock but revised the target price to Rs 375 per share. They anticipate the bank’s growth to remain around current levels, with margins holding at 3 percent, thanks to the benefit of MCLR repricing partly offsetting the rise in the cost of funds (CoF).
Canara Bank, headquartered in Bengaluru, announced on Monday that its standalone net profit for the June quarter surged by an impressive 75 percent YoY to Rs 3,535 crore. In the corresponding period of the previous year, the net profit was Rs 2,022 crore.
Additionally, the bank’s operating profit (before provisions and contingencies) grew by 15 percent YoY to Rs 7,604 crore in the quarter under review, compared to Rs 6,606 crore in the same quarter last fiscal.
As of Tuesday, Canara Bank’s shares were trading at Rs 335.70 apiece on the NSE, down 1.19 percent from the previous session. Over the last year, the stock has shown remarkable growth, soaring by approximately 50 percent, while it has remained steady on a year-to-date basis.
Rekha Jhunjhunwala, the wife of the late ace investor Rakesh Jhunjhunwala, has maintained her position in Canara Bank. As of June 30, she holds 37,597,600 shares, representing a 2.07 percent stake in the state-run bank, which is the same as her stake on March 31.
