Target: ₹160
CMP: ₹117.25
Canara Bank delivered a strong quarter with an all-round beat as core PPoP was 13.3 per cent higher, led by better NII (superior NIM), fees and opex. Loan growth was healthy at 6.5 per cent q-o-q; excluding FCNR(B) related loans too, domestic credit growth was strong at around 5 per cent q-o-q mainly aided by corporate/agriculture. NIM may sustain at current level supported by rise in corporate/agri loan yields, upcoming festive season that could spur demand for retail credit, low LDR at about 80 per cent and EBLR repricing.
Bank expects loan momentum to sustain as corporate pipeline is ₹47,000 crore and festive demand is expected to support retail lending. FCNR(B) deposits of $5.8 billion helped avoid raising wholesale funding of ₹30,000-35,000 crore; which was partly offset by low spreads of 40-50 bps on FCNR(B) related advances.
Lower net slippages and reversal in NPI provisions led to lesser overall provisions at ₹1,780 crore (PLe ₹2,220 crore). Core PAT was 26.6 per cent above PLe at ₹4,740 crore, while reported PAT stood at ₹5,170 crore .
One-time ECL provision is estimated at ₹12,000–15,000 crore, which is expected to be absorbed over 2 years, against RBI’s 5-year dispensation supported by strong capital buffers (CET-1: 12.8 per cent).
For FY27/28E we raise NIM by 7/6bps and core PAT by average about 6 per cent. We keep multiple at 1.0x but raise TP to ₹160 from ₹150 as we roll forward to Sep’28 ABV. Retain ‘Buy’.