Whalesbook
Emkay Reiterates 'Buy' Rating
Emkay Global Financial has kept its 'Buy' rating on Canara Bank, lowering the target price to Rs 160 from Rs 170. Emkay noted the bank's strong 16% year-on-year credit growth, which significantly beat its own guidance and followed a trend among public sector banks.
Margins Improve on Lower Costs
Canara Bank saw its net interest margin rise by 9 basis points quarter-on-quarter, mainly due to lower funding costs. The bank aims to maintain strong margins despite rising costs. For FY27, management forecasts 11-12% credit growth, though Emkay expects this to be exceeded, as it was in FY26.
Earnings Miss, Risks Seen Manageable
The bank's profit after tax came in at Rs 45 billion, missing expectations by 14%. This was mainly due to weaker treasury results. Emkay Global Financial views the potential Rs 100 billion (0.8% of loans) impact from Expected Credit Loss (ECL) provisions as manageable, supported by the bank's strong 12.4% Common Equity Tier 1 (CET 1) ratio.
Growth Outlook and Valuation
Emkay kept its earnings forecasts largely unchanged, projecting a 1% Return on Assets (RoA) for FY27-28, easing to 0.9% in FY29. The valuation assumes the bank trades at 1 times its FY28 estimated book value, with its subsidiaries and investments adding another Rs 11 per share.