Shares of Canara Bank fell 8.10 percent to close at ₹201.45 and extended losses into the second consecutive session on May 9 after the stock declared its March quarter earnings. In comparison, BSE Bankex, the index tracking banking stocks, fell 0.95 percent.
The public sector lender on May 6 reported a 65 percent year-on-year (YoY) growth in net profit to ₹1666 crore. Operating profit during the quarter grew 18.80 percent YoY while net interest income (NII) grew 24.84 percent.
The bank's total income went up from ₹21,040 crore in Q4FY21 to ₹22,320 crore, clocking a YoY rise of little more than 6 percent.
The bank said its gross non-performing assets (GNPA) ratio reduced to 7.51 percent in Q4FY22, down from 7.80 percent in Q3FY22 and 8.93 percent in Q4FY21.
The net non-performing assets (NNPA) ratio reduced to 2.65 percent in Q4FY22, down from 2.86 percent in Q3FY22 and 3.82 percent in Q4FY21.
Its NPA provisioning in Q4FY22 stood at ₹2,130 crore against its NPA provisioning amount of ₹4,430 crore in Q4FY21. However, net provisions of the bank, as reported by Mint, have gone up in Q4FY22 to ₹3,710 crore against ₹3,650 crore in Q4FY21.
Canara Bank also announced a dividend of ₹6.50 apiece for its shareholders.
Brokerages maintain a positive stance
The March quarter result of the bank has garnered positive reviews from most brokerages as they have recommended buying the stock.
Brokerage firm Motilal Oswal Financial Services has maintained a 'buy' call on the stock with a target price of ₹280, saying Canara Bank reported mixed operating performance with NII growing 25 percent YoY which was 5 percent below expectations; however, healthy treasury gains enabled in-line growth in total revenue.
"The bank reported a stable operating performance supported by healthy margins, modest loan growth and strong asset quality. While corporate book saw a small decline, the bank has continued to grow RAM (retail, agriculture and MSME) segment at a steady pace with contribution from all segments," said Motilal Oswal.
"Despite elevated slippages, asset quality ratios improved further underpinned by higher recoveries and upgrades. Declines in SMA (special mention account) overdue and restructured portfolio provide incremental comfort on asset quality trends. We estimate an RoA (return on assets) and RoE (return on equity) of 0.7 percent and nearly 13 percent, respectively, by FY24," the brokerage firm added.
Brokerage firm JM Financial said Canara Bank reported a steady quarter and maintained a 'buy' call on the stock with a target price of ₹300.
JM Financial expects Canara Bank's earnings recovery to be driven by credit cost normalisation (1.4 percent by FY24E), and a pick-up in loan growth.
"We build in a gradual improvement of RoA to 0.66 percent and 0.74 percent by FY23E and FY24E," said the brokerage firm.
Brokerage firm Emkay Global also has a 'buy' call on the stock with a target price of ₹282, saying that Canara Bank reported a higher-than-expected PAT of ₹1670 crore in Q4, mainly aided by higher other income and lower provisions.
"We expect a gradual improvement in RoA and RoE to 0.6-0.7 percent and 12-15 percent over FY23-25E from 0.5 percent and 11 percent in FY22, led by better growth and lower LLP. Key risks to our estimates include higher-than-expected NPA formation, a slower growth trajectory, and a sharp rise in G-Sec yields leading to lower treasury gains," said Emkay Global.
Market sentiment on the stock is ‘neutral’, according to a MintGenie poll and an average of 11 analysts has 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.