Canara Bank share price: Canara Bank’s Q4 results met expectations from the market. Despite a rise in the cost of funds, the net interest margin (NIM) for the quarter expanded slightly. This was attributed to the bank’s ongoing efforts to adjust its exposure to older, low-yielding corporate assets, either by renewing them at current rates or by replacing them with higher-yielding alternatives. Analysts are now closely watching for potential provisions to be reversed in the future.
According to Motilal Oswal, Canara Bank posted healthy earnings in line with expectations, driven by increased other income, although this was partially offset by provisions that were higher than anticipated. The bank experienced robust growth in Net Interest Income (NII), leading to a 4 basis points quarter-on-quarter margin expansion.
Despite this, the management foresees NIMs to be between 2.9-3 percent in FY25. Growth in loans was primarily fueled by the retail segment, while deposit growth accelerated, particularly in CASA deposits, with a positive outlook ahead. Although fresh slippages rose sequentially, overall asset quality metrics showed improvement.
Motilal Oswal Securities maintains its earnings estimates and anticipates Canara Bank to achieve a Return on Assets (RoA) and Return on Equity (RoE) of 1.1 percent and 18.4 percent respectively by FY26. The brokerage reaffirms its ‘Buy’ rating on the stock with a target price of Rs 650. As of Thursday, the stock was trading 0.32 percent higher at Rs 559.90 on the BSE.
JM Financial stated that the management anticipates employee costs to stabilize moving forward, with the cost-to-income ratio expected to be capped at 47 percent.
The brokerage highlighted that asset quality indicators continued to improve, with the Provision Coverage Ratio (PCR) standing at a robust 71 percent. Given the bank’s consistent maintenance of stable Net Interest Margins (NIMs), ongoing reduction in credit costs, and sustained Return on Assets (ROA) of 1 percent over several quarters, JM Financial expects Canara Bank’s reevaluation to persist in the future. They project a RoA/ROE of 1.02 percent/16.7 percent by FY26E and uphold a BUY recommendation with a revised target price of Rs 600. -Canara Bank share price
Kotak Institutional Equities noted that loan growth lagged behind industry growth, registering a subdued 11 percent year-on-year, while NIM remained largely unchanged. The brokerage observed that asset quality remains satisfactory, although the trend of bad loan recoveries is on a downward trajectory.
This brokerage assigns a fair value of Rs 530 to Canara Bank.
Their valuation methodology involves valuing the bank at 1x March 2026E adjusted book value, considering Return on Equity (RoE) estimates of 15-16 percent in the medium term. They note recent improvements in Canara Bank’s return ratios, driven by decreasing credit costs and robust recoveries from previously written-off accounts. However, they anticipate sustained pressure on Net Interest Margins (NIM) in FY2025E, along with an expected decline in recoveries from written-off accounts.
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While the bank may manage to offset most of the impact on Return on Assets (ROA) through further reductions in credit costs, the trend regarding provision reversals will be closely monitored as a key factor.
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