Bengaluru-based Canara Bank on Wednesday defied the market bears and traded in an uptrend as investors pegged the earnings of this government-owned lender for the quarter and year ended March 31, 2022. The bank saw strong growth in the bottom-line and top-line. Up front, on a year-on-year basis, while asset quality improved – increasing optimism among investors. LKP Securities has further increased its target price and has given a buy rating on the bank.
Rakesh Jhunjhunwala, an ace investor, will get the benefit of offtake Canara Bank The lender ranks among the top 10 stocks in its portfolio in terms of value.
Canara Bank shares closed with a gain of 1.20% on Wednesday 202.15 each on BSE. Shares close at day’s high 203.70 each.
Share last day. closed on 199.75 on the same exchange.
Shares rise after bank posts Q4 net profit 1,666.22 crore, an increase of 64.8% 1,010.87 crore in the same period last year. Net interest income jumps 24.85% 7,005.87 crore against 5,611.12 crore in Q4FY21. Gross NPAs improved to 7.51% in Q4FY22, 7.80% in Q3FY22 and 8.93% in Q4FY21.
For the full fiscal year 2012, net profit climbed 5,678.42 crores more than doubled 2,557.58 crore in FY 2011. net interest income increased 26,383.99 crore in FY22 as against 24,102.84 crore in FY 2011.
On the financial performance, Ajit Kumar Kabi, an analyst at LKP Research said, “Canara Bank has been reporting steady growth in net profit for the last eight quarters. A huge provision ( 54 billion) made in 4QFY20 (two years ago), continued to protect the balance sheet with a PCR (count) of 67% and a PCR (including two) of 84%. Bank’s margins (2.9%) in 4QFY22 are on an upward trend with continued improvement in CD ratio. On the business front, the Bank is reporting steady credit growth across all segments (a 2% sequential jump seen in 4QFY22).”
On asset quality, analysts said, “Absolute GNPA is decelerating gradually, with moderate slippage and higher recovery. In 4QFY22, a decline was expected 36 billion (v/s 27 billion in 3QFY22) while higher recovery and upgradation as well as strong credit growth led to a decline in the GNPA/NNPA ratio by 29bp/19bp, respectively. PCR sequentially improved by 130bps to 66.5%. The bank made a provision of 75% on Srei Infra exposure and directed the NPL cut to remain more than slippery in the coming quarters. The overall SMA is correcting overdue (1/2) and declined to 0.7% from 1.76% in 3QFY22. Further, the bank’s restructured book (2.3%) is at par with its counterparts.”
Further, he added, “The exposure to Air India stands 2 billion which has been fully recovered and the bank has exposure to Future Group but the management is confident that the exposure will remain normative and is unlikely to slip. Considering the higher recovery, we anticipate the GNPA/NNPA ratio to be 7.3%/2.6% at the end of FY13 with stable PCR of 67%.”
The LKP analyst also pointed out that the bank raised capital in FY2011 resulting in CET-1 of 10.3% (at par); Thus, we believe that the bank can raise capital through stake sale of AMC, HFC and insurance company. “We believe that the odds of the merger (with Syndicate Bank) are behind and the bank will see a gradual improvement in profitability with FY23E ROA/ROE of 1%/16%,” he added.
Overall, he added, “Keeping in view the near-term capital infusion, we expect the bank’s loan book to grow cautiously at a CAGR of 9.2% over FY 2011-23E, led by corporate book growth. In our opinion, the credit cost of the bank will further normalize. The ROA/ROE is estimated at 1% and 16% in FY23E and FY23E. We value the standalone entity at 0.6xFY23E BVPS ( 433) and reach the target price of Rs.260. We recommend a buy with a potential increase of 30%.”
LKP Securities analyst has a buy call with a target price of 12 months 260 per.
Shares of Canara Bank have gained about 35 per cent in a year on the BSE. Shares were at this level on May 11 last year 150.05 each on Dalal Street.
The Bull of Dalal Street, Rakesh Jhunjhunwala holds around 2% stake in Canara Bank as on March 31, 2022. The investor increased his stake in Canara Bank by 0.36% to 35,597,400 equity shares or 1.96% in Q4FY22.
As per Trendline data, the value of Jhunjhunwala’s stake in Canara Bank as on May 11, 2022 is around 720 crores – which is the seventh largest stock in his account in terms of value. Titan holds the top position with its shareholding 9,485 crore in this Tata group company, while Star Health and Metro brands are at the second and third positions with their shareholding. 6,910.2 crore and 2,059.1 crore respectively. Shareholding in Tata Motors and Crisil was at the fourth and fifth highest levels 1,523.5 crore and 1,277.9 crores respectively. Ranked 6th with Fortis Healthcare’s assessment 773.5 crores.