Canara Bank Q1 Results Review - Healthy Performance; RoA To Expand Further: Motilal Oswal

Motilal Oswal Report

Canara Bank reported a healthy quarter with profit after tax up 75% YoY to Rs 35.3 billion (14% beat), driven by higher ‘other income’. Net interest income grew 28% YoY (inline), while margins moderated marginally by 2 basis points QoQ to 3.05%.

On the business front, loan book grew ~15% YoY (3% QoQ), while deposits grew 7% YoY (1% QoQ).

The asset quality ratios have improved and the management is optimistic about further reducing net non-performing asset at an accelerated pace.

However, the special mention account book increased 51% QoQ to Rs 98.9 billion.

We revise our earnings estimates slightly to factor in lower opex and expect Canara Bank to deliver FY25E return on asset/return on equity of 1.1%/17.3%.

We reiterate our 'Buy' rating with a target price of Rs 425 (0.9 times FY25E adjusted book value).

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