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Canara Bank Research Report - 21st Jan 2016

Banking | Published on Nov 20th 2015


In its 2QFY2016 results, Canara Bank reported a decline in PAT by 15.6% yoy, mainly due to higher provisions and surge in operating expenses. Loan book grows at a slow pace; NIM rises qoq During 2QFY2016, the bank’s loan book grew by 3.9% yoy with retail loan book growing at a faster pace at 14.3% yoy. The C-D ratio came down to 66.6% from 67.4% in 2QFY2015. Deposits growth was muted at 5.2% yoy with CASA deposits showing momentum, which grew by 11.5% yoy. As a result, the domestic CASA ratio for the bank rose by 178bp yoy to 25.5% as of 2QFY2016. The Reported Global NIM rose sequentially from 2.21% in 1QFY2016 to 2.24% in the current quarter which aided NII growth of 11.8% for the quarter. The Management expects to reach 2.35% NIM by the end of this fiscal year. During 2QFY2016, the non-interest income (excluding treasury) was subdued with a yoy growth of 4.4% yoy largely aided by recoveries from written off accounts. Treasury income, at Rs295cr, more than doubled for the quarter on a yoy basis (Rs144cr in 2QFY2015). On the asset quality front, slippages came at Rs2,202cr (annualized slippage rate of 2.7% as compared to 3.1% in 1QFY2016). Recoveries and upgrades were lower at Rs1,261cr as compared to Rs2,478cr in 1QFY2016. As a result, the Gross NPA ratio went up to 4.27% as compared to 3.98% in 1QFY2016, whereas the Net NPA increased to 2.90% from 2.74% in 1QFY2016. Additionally, the bank restructured advances worth Rs600cr during the quarter taking the book to Rs29,026cr as on 2QFY2016. The Provision coverage ratio improved to 59.81% from 58.68% in 2QFY2015. Outlook and valuation: Canara Bank has been reporting subdued growth in its profitability over the past several quarters. It has a larger exposure to various stress sectors in the economy as compared to its peers. At the current market price, the stock trades at 0.4x FY2017E ABV. We maintain our Neutral view on the stock.

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CMP 270
Target Price
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)17,647.21
MCAP NSE (Rs in Cr)17,636.35
P/E (x)NM
EPS (Rs.)-56.40
BV (Rs.)485.53
Div Yield (%)0.00
FV (Rs.)10.00
P/BV (x)0.67
EV/Sales (x)10.69
EV/EBITDA (x)13.98

Shareholding Pattern (%)

Public & Others6.0
Grand Total100.0

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