Canara Bank Q4 Review: Limited Standard Provision Buffers, Modest Profitability Metrics Limit Valuations

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Canara Bank’s limited standard provision buffers and modest profitability metrics limit valuations for us, though low delinquencies and improved provision coverage ratio provide comfort. Net interest margin at 2.8% is at the lower end of the industry, and earnings are modest with RoA at 0.9-1%, with high dependence on recoveries from written-off book (higher relative to peers).

Once the benefits of recoveries on P&L (both from gross non-performing asset and WO pool) start fading, it may impact the bank’s earnings profile. We value the bank at 0.9x FY27E adjusted book value, with a target price of Rs 115.

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