Shares of Canara Bank reached a new 52-week high of ₹288 in Tuesday's intra-day trade. Since the release of its Q2 numbers on October 20, the stock has accelerated 9.54%, gained nearly 19.46% in the past week, and 23.66% over the past month.
The stock surged nearly 42.65% in the last one year, which is 40.14% higher than the Bank Nifty, which returned 2.51% in the same period. Since September 28, the stock has nearly experienced a one-way spike by rallying 36.26 to date.
The bank's net profit has been steadily growing for the last ten quarters, beginning with the June 2020 quarter. In the first quarter of this fiscal year, the bank posted a standalone net profit of ₹2,022 crore, crossing the 2,000 crore mark for the first time. The bank continued this trend in the second quarter, posting a standalone net profit of ₹2,525.5 crore. The bank reported a net profit of ₹1,332.6 crore in the September quarter of the previous fiscal.
The net interest income grew by 18.5% YoY to ₹7,434 crore in the September ending quarter. The net interest margin of the bank stood at 2.86% in Q2 as against 2.77% in the same quarter of the previous fiscal. The non-interest income grew by 13% YoY to ₹4,825 crore during the same period.
During the second quarter of the current fiscal, the net non-performing assets (NNPA) fell to ₹17,286 crore as against ₹20,884.40 crore in the same quarter last year.
The bank's provisions came down to ₹3,637 crore in the September-ending quarter from ₹3,690 crore in the previous quarter. The provision coverage ratio of the bank stood at 85.36% as of September 2022 versus 84.51% as of June 2022.
For Q2 the domestic deposit stood at ₹10,56,519 crore, an increase of 7.77 per cent YoY over the same quarter last year.
Canara Bank shifted to a new tax regime that led to a reduction of ₹2,451.6 crore in deferred tax. The lender said it adopted new tax regime rates as per Section 115BAA of the Income Tax Act with effect from Assessment Year 2022–23.
After the Q2 numbers, domestic brokerage firm Motilal Oswal has given a 'buy' call on the stock with a revised target price of ₹340/share, an upside of over 26% from the stock's previous closing price. The brokerage expects Canara Bank to deliver FY24E RoA/RoE of 1.0% and 16.2%, respectively. In addition, the brokerage raises its PAT estimates for FY23-24 by 17%-19% to account for higher NII, other income, loan growth, and a lower tax rate.
On the other hand, Emkay Global Financial also maintained a 'buy' recommendation on the stock with a revised target price of ₹330/share. The brokerage now expects RoA and RoE to improve to 0.9% and 17% by FY25E (without considering a capital rise).
The brokerage said credit growth surprised positively by 21% YoY and 6% QoQ, on strong corporate and retail loan traction. Deposit growth remains moderate, as seen across peers, leading to better LDR.
LKP Securities has a 12-month target price of ₹323 on Canara Bank, implying an 20% upside from its latest close. It expects the bank’s loan book to fatten cautiously at a CAGR of 20% over FY22–24E, led by RAM and corporate book growth. The bank’s credit costs will normalise further by FY23E and it estimates the return ratio of ROA/ROE at 1.2% and 18.9% in FY24E.
Canara Bank provided services to more than 10.4 crore customers as of June 2022 through a network of 9,732 branches and 12,201 ATMs/recyclers located throughout all Indian states and Union Territories.
An average of 13 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
