Canara Bank shares hovering near 52-week high. Should you buy post Q3 results?

Canara Bank reported a strong operating performance supported by healthy traction in loan growth and improvement in asset quality while margin expansion drove NII. Loan growth was led by Corporate, Retail and Agri segments and the outlook remains encouraging, said domestic brokerage and research firm Motilal Oswal. 

“Slippages declined sequentially; thus asset quality ratios improved further underpinned by higher recoveries and upgrades. Decline in SMA overdue and restructured portfolio provides incremental comfort on asset quality trends. We raise our PAT estimates by 5% each for FY23/24 and 4% for FY25 to account for higher NII and lower provisions. We estimate an RoA/RoE of 1.1%/17.5% for FY25,” the note stated while the brokerage has maintained its BUY rating on Canara Bank shares with a revised target price of ₹410 apiece.

The bank’s net interest income or NII, which is the difference between the interest earned and expended, rose about 24% to ₹8,600 crore during Q3 as against ₹6,945 crore year-on-year (YoY). Its net interest margin (NIM), a key metric for a bank’s profitability, stood at 3.04% as compared to 2.83% in the previous quarter.

Loan growth is likely to remain at around 14-15% for FY23 and margins are expected to remain at ~3.0% for FY23. Management remained confident of maintaining ~1.2% credit cost. The bank is aspiring to deliver an RoA of 1% by next year, the brokerage highlighted.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.