Canara Bank: The retail segment led loan growth, while deposit growth was modest, with the CASA ratio showing sequential deceleration, according to the MOFSL report.
Which bank is completely owned by the government?
Some of India’s largest government banks are the State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Central Bank of India, Bank of India, and so on. The State Bank of India, founded in 1806 as the Bank of Calcutta, is today the country’s largest bank.
Canara Bank, whose shares have increased by 66% in the last year, reported mixed quarterly results, with in-line earnings driven by lower provisions offsetting muted net interest income (NII). The PSU bank stated that a change in accounting policy resulted in a 17 basis point consecutive contraction in its net interest margin.
The retail industry drove loan growth in the first quarter. According to MOFSL, deposit growth was modest, and the CASA ratio moderated sequentially.
Can banks report first-quarter results?
Canara Bank’s Q1 net profit climbed by 10.5% YoY to ₹3,905 crore in June 2024 (Q1FY25), meeting analyst forecasts.
“Overall asset quality ratios have improved, with slippages also improving slightly. We expect Canara Bank to generate an FY26E RoA/RoE of 1.1 percent/19.3 percent. MOFSL reiterated its buy recommendation, with a target price of Rs 133 (based on 1.1 times FY26E ABV).
Kotak Institutional Equities maintained its ‘Reduce’ rating on the company and set a fair value objective of Rs106. It values the bank at 1 June 2026E adjusted book, with a medium-term return on equity of 15%.
Kotak Institutional Equities
Kotak Institutional Equities has maintained a ‘Reduce’ rating, setting a fair value target of Rs 106. The valuation is based on the June 2026E adjusted book, with a medium-term return on equity of 15%. Kotak notes that the bank is likely past its peak performance but expects NPL ratios and loan costs to remain stable. The bank’s guidance includes cautious growth of 10% YoY, stable NIM with limited improvement potential, and further enhancements in gross and net NPL ratios driven by balance sheet growth.
“We have a consistent investment theme for the bank. The bank is most likely long past its best-in-class performance, which is what motivates our grade at this point. However, we expect that Canara Bank’s NPL ratios and, as a result, loan costs will remain stable. The bank’s guidance is as follows: (1) growth is very cautious at 10% YoY, (2) NIM remains stable with little headroom for improvement, and (3) further improvement in gross and net NPL ratios, primarily driven by balance sheet growth,” it said.
Meanwhile, Kotak stated that the contribution from recovery from written-off loans will slowly decline, placing extra pressure on Canara Bank’s return on assets unless the bank can improve cost ratios.
Canara Bank’s June quarter profit increased 10.47 percent to Rs 3,905.28 crore from Rs 3,534.84 Cr in the same quarter last year. The gross NPA ratio decreased 101 basis points to 4.14 percent from 5.15 % in the June 2023 quarter. The bank’s net NPA ratio declined to 1.24 percent, down 33 basis points from the previous quarter’s level of 1.57%.
The accounting policy change hurt yields and NII. Penal interest was formerly recorded in interest income, but it is now shown in other revenue, resulting in a difference of Rs 150-160 crore. According to the bank, Canara Robeco disinvestment is expected in Q4, which should boost CET-1 even more. Furthermore, the revised investment guidelines increased the total amount by Rs 1,400 crore. A total of Rs 1,100 crore was added to the reserve, while Rs 300 crore was transferred to HTM.
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