Canara Bank: In Wednesday’s intraday trade on the BSE, shares of the state-owned Canara Bank surged up to 4.8% at Rs 118.90 a share. Over 8% of the stock’s value has increased in the last three trading sessions.
The company’s stock split arrangement of 1:5, which implies that one equity share divided into five, went into effect on Wednesday, which is why there was a rise today.
The public sector lender had established Wednesday, May 15, 2024, as the record date for assessing equity owners’ entitlement to split the bank’s existing equity shares earlier this year, on April 19, 2024. One equity share, with a face value of Rs. 10, would be split into five equity shares, each with a face value of Rs. 2, according to the terms of the stock split arrangement.
A stock split lowers the cost of individual shares, making them more accessible to retail investors and potentially stimulating greater trading volume. This is especially advantageous for smaller investors who may have been dissuaded by the higher share price in the past.
Furthermore, the stock split could expand the bank’s pool of retail investors. Before the split, a considerable portion of the bank’s ownership was concentrated among a limited number of High Net Worth Individuals (HNIs), which included prominent investors like Rekha Rakesh Jhunjhunwala.
It’s crucial to distinguish between a stock split and a bonus share issue. In a stock split, existing shares are divided into multiple shares with reduced face values, whereas in a bonus share issue, additional shares are allocated to current shareholders proportionate to their existing holdings. Consequently, although a stock split augments the total number of shares outstanding, it doesn’t directly affect the company’s share capital.
Canara Bank achieved an 18.33 percent year-on-year increase, reaching Rs 3,757 crore in the January-March quarter of fiscal year 2023-24 (Q4FY24). The bank’s net interest income (NII) saw a growth of 11.18 percent, reaching Rs 9,580 crore in the fourth quarter of FY24. In comparison, the bank recorded an NII of Rs 8,617 crore during the same period in the previous year.
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At 11:17 AM, the company’s stock was trading at Rs 118.40 per share, reflecting a 4.55 percent increase. In contrast, the S&P BSE Sensex was marginally down by 0.04 percent.
