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Dolat Capital Report
Canara Bank reported good set of numbers with strong net interest income growth (net interest margin higher by 20 basis points QoQ to 2.9%) and contained credit costs aiding profit after tax growth of 116% YoY, with return on assets of 0.9%. With 88% of loans floating rate (49% marginal cost of funds based lending rate), NIM expansion is expected to continue in the interim.
Loan growth was led by corporate advances (up 5% QoQ), including 14% sequential growth in overseas book. Rest of the book (risk assessment management) grew by 2% QoQ.
Canara Bank's asset quality trends were healthy with lower than expected slippages at 1.5% stable restructured book at Rs 165 billion or 2% of advances. Slippages from restructured book (excluding of Future retail) have been fairly contained at 12%.
We build in higher NIM for FY23E, resulting in earning upgrade of 9%. Asset quality risks are abating and moderation in credit cost will continue to be a key profitability lever, apart from higher near term NIM.
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