Canara Bank shares soar 8% to 52-week high on impressive Q2 numbers

This strong uptick in the shares was in response to the bank’s impressive September quarter numbers, which were released on Thursday after market hours. The state-owned bank reported its highest-ever quarterly net profit of ₹3,606 crore in Q2 FY24, a jump of 42.81% compared to the net profit of ₹2,525 crore reported in the same period last year.

In the preceding June quarter, the bank had reported a net profit of ₹3,535 crore. The strong rise in the net profit during the quarter was attributed to a healthy growth in the net interest income and a drop in provisions.

The net interest income of the bank grew by 19.76% YoY to ₹8,903 crore in the September quarter, while the net interest margin of the bank came in at 3.02% in Q2, an improvement of 19 basis points YoY.

The pre-provision operating profit (PPOP) of the bank reached ₹7,616 crore for the September 2023 quarter, showing a growth of 10.30% YoY. The bank’s provisions came down to ₹4,010 crore from ₹4,380 crore in Q2FY23.

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On the asset quality front, the bank’s gross non-performing assets (GNPA) ratio stood at 4.76% in Q2 FY24 as against 6.37% in Q2 FY23. The net non-performing assets (NNPA) ratio improved to 1.41% in Q2 FY24 from 2.19% in Q2 FY23. The provision coverage ratio (PCR) improved to 88.73% in Q2FY24 from 85.36% in Q2FY23.

Global business increased by 10.12% YoY to ₹21,56,181 crore in Q2 FY24, with global deposits coming at ₹12,32,215 crore, a growth of 8.66% YoY, and global advances (gross) stood at ₹9,23,966 crore, a surge of 12.11% YoY. Further, the domestic deposits of the bank jumped by 8.22% YoY to ₹11,43,394 crore.

Following the company’s Q2FY24 performance, global brokerage firm JM Financial maintained its ‘buy’ call on the stock with a target price of ₹395 apiece.

Kotak Institutional Equities also maintained a ‘buy’ rating on the stock, setting a target price of ₹425. The brokerage expects delinquencies for Canara Bank to remain muted in the current benign environment. Consequently, it expects the bank to maintain high return ratios, driven by a steady decline in credit cost, offsetting the impact of any pressure on its margins.

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Along with this, high financial leverage will support the sustainability of the mid-to-high teen RoEs over the medium term, it added.

The bank has seen a significant re-rating over the past few quarters, thereby narrowing the valuation gap with its best-in-class peers. A further re-rating will be contingent on the re-rating of the PSU banking space as a whole, as stated by the brokerage.

Motilal Oswal also retained its ‘buy’ recommendation on the stock with a target price of ₹440 apiece.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions. 

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Updated: 27 Oct 2023, 02:34 PM IST