PSU bank stock to buy: The benchmark equity indexes Sensex and Nifty finished down on Tuesday in extremely volatile trade, extending their losing streak to the third day in a row as investors sought profit amid uncertainty surrounding the Lok Sabha election results.

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After fluctuating between gains and losses throughout the day, the 30-share BSE Sensex closed 220.05 points, or 0.29 per cent down, at 75,170.45. During the day, it peaked at 75,585.40 and dropped to 75,083.22.

Despite starting the day on a bullish note, the NSE Nifty fell 44.30 points, or 0.19 per cent, to close at 22,888.15.

Meanwhile, let's take a look at brokerage Motilal Oswal's pick on this PSU bank stock. The brokerage has recommended buying Canara Bank shares for more than 20 per cent gains.

Canara Bank- Share price target

Brokerage Motilal Oswal has maintained a 'buy' rating on 'Canara Bank's stock with a target price of Rs 140 per share. This implies an upside over 20 per cent from its current price. 

On Tuesday, May 28, shares of Canara Bank closed at Rs 115.95 each, down 0.86 per cent on BSE.

The brokerage says that the performance of Canara Bank was strong. Earnings got a boost due to stable revenue growth and controlled provisions. The bank's earnings may remain at 15-18 per cent. Asset quality is improving. The gross NPA (GNPA) of the bank has come down by 330bp in the last 2 years to 4.2 per cent. Net NPA (NNPA) declined by 145bp to 1.3 per cent during the same period.

The bank has delivered RoA/RoE of 1.0 per cent/20 per cent during FY24. RoA may improve to 1.1 per cent by FY26E. Loan growth can be 12 per cent CAGR. The bank has kept the cast ratio under control due to branch realization and digitisation.

Canara Bank Q4 earnings

On May 8, the PSU bank reported its fourth quarter results for the financial year 2024. It recorded an 18.4 per cent rise in its net profit to Rs 3,757.23 crore for the January-March quarter of 2023-24 compared to the same period of the previous year.

On a sequential basis, the bank's net profit rose 2.8 per cent over the October-December quarter. Canara Bank's board of directors has recommended a dividend of Rs 16.10/- per equity share (161 per cent) of the face value of Rs 10 per share.

Read More: Canara Bank posts 18.4% jump in Q4 net profit, declares dividend of 16 per share

Canara Bank dividend

On the same day of the Q4FY24 earnings announcement, Canara Bank's board of directors also recommended a dividend of Rs 16.10 per equity share (161 per cent) of the face value of Rs 10 per share.

BSE share price history

In the past six months, the stock has zoomed over 40 per cent. It has recorded around 90 per cent gains in one year.