Broker’s call: Canara Bank (Buy)

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Target: ₹506

CMP: ₹384.25

The Canara Bank has been reporting consistent growth in net profit since previous thirteen quarters. In Q2-FY24, the profitability increased by 42 per cent YoY and 2 per cent sequentially on the back of lower provisioning expenses. A bulky provision (₹5,400 crore) made in Q4-FY20 (three years ago), continued to safeguard the balance sheet from delinquencies.

On asset quality front, the GNPA/NNPA ratio (4.76/1.41 per cent) improved by 39bps and 16bps respectively on the back of stable slippages of ₹2,900 crore. The slippages ratio (calculated) marginally down at 137bps annualised v/s 163bps in the previous quarter. The cumulative SMA1/2 book also stable at 11bps/48bps of loan book. On the business front, the bank has reported healthy net credit growth of 13.2 per cent YoY and 4.3 per cent sequentially.

The bank’s recoveries are in line with the guidance and expect the credit cost to be below 2 per cent for FY24. Furthermore, the NIMs flat sequentially to 3.02 per cent. We believe the bank is growing the balance sheet with well-adjusted margins and it is expected to bode well in near term. We believe the bank has recovered well and expected to witness gradual improvement in profitability with FY25E ROA/ROE of 1.1/17.2 per cent.