Canara Bank zooms over 6% post in-line Q2 show, improved asset quality

Shares of Canara Bank in Friday’s session (October 27) traded over 5% higher at Rs 378.4 after the lender posted a good set of numbers for the quarter ended September. At day’s high, the stock scaled to 382.8, a 6.38 per cent gain over the previous session.

Standalone net profit at the lender grew 42.8 per cent year-on-year (YoY) to Rs 3,606.1 crore for the September quarter. Net interest income or NII at the bank also registered 19.8 per cent on year to Rs 8,903 crore for the quarter under review. 

Net interest margin, a measure of profitability, however took a marginal hit and came in at 3.02 per cent versus 3.05 per cent in the quarter ended June of the current fiscal year. 

Provisions at the state-run bank declined considerably by 19.8 per cent YoY to Rs 2201 crore during the July-September quarter.

Also, asset quality at the bank improved, with gross NPAs reported at 4.76 per cent during the Q2 period in contrast to 5.15 per cent in the previous quarter. Also, NNPAs improved to 1.41 per cent from the earlier 1.57 per cent of the bank’s total advances.

Brokerages view on Canara Bank post Q2FY23 show

Motilal Oswal Financial Services is bullish on the counter and has maintained its buy rating with a target price of Rs 440, implying potential upside of 22 per cent from the last closing price.

The brokerage iterates that the bank has reported an in-line performance driven by lower provisions. “We revise our earnings estimates slightly to factor in lower provisions and expect Canara Bank to deliver FY25 RoA/RoE of 1.1%/17.6%,” added the brokerage.

Global brokerage Morgan Stanley, however, maintained its underweight call on the counter with a target of Rs 315.