Rakesh Jhunjhunwala portfolio stock Canara Bank fell on Tuesday after the lender reported a 72% on-year jump in its net profit to Rs 2,022 crore for the quarter ended June on the back of a 24.5% growth in non-interest income to Rs 5,175 crore. On asset quality front, Canara Bank witnessed improvement as gross non-performing assets (NPAs) fell to 6.98 per cent of gross advances at end of June 30, 2022 as against 8.50 percent by end of June 2021. Canara Bank stock price has rallied around 9% so far this year, outperforming both NSE Nifty 50 and Bank Nifty indices. Analysts at Motilal Oswal Financial Services remain bullish on the stock and see up to 34% potential upside as they expect the lender to deliver RoA, RoE of 0.8% and 13.8% respectively in FY24. Canara Bank share price fell 1.8% to a low of 220.30 on NSE intraday.
Declines in SMA overdue, restructured portfolio provide comfort on asset quality trends
Canara Bank reported a steady operating performance supported by healthy loan growth and improvement in asset quality while NII growth was soft as margin contracted. However, management expects to recoup this as the benefit of rising rates will flow through in the coming quarters, according to analysts at Motilal Oswal. Slippages were flat sequentially, despite downgrade of a lumpy corporate account, they added. “Asset quality ratios improved further underpinned by higher recoveries and upgrades. Declines in Special Mention Accounts (SMA) overdue and restructured portfolio provide incremental comfort on asset quality trends” the brokerage said. It retained ‘buy’ rating on Canara Bank shares with a target price of Rs 300 apiece, implying 34% upside.
Strong performance in past few years
Kotak Securities analysts also maintained an ‘Add’ rating on Canara Bank stock with an unchanged fair value (FV) of Rs 260. “We value the bank at 0.8X March 2024E adjusted book with RoEs touching ~11% in the medium term. We have adequate comfort on the bank’s outlook, especially given its performance over the past few years,” it said. The brokerage believes that Canara Bank has done better than some of its PSU bank peers. However, macro concerns continue to weigh on mid tier banks including Canara Bank, which will likely delay the valuation re-rating for the lender.
Rakesh Jhunjhunwala owns 3,55,97,400 shares or 1.96 per cent stake in the state-owned bank, according to Canara Bank shareholding pattern for Q1FY23. Jhunjhunwala ast increased his shareholding in Canara Bank to 3.55 crore equity shares or 1.96% in March. In the October to December quarter, Jhunjhunwala’s holding in Canara stood at 2.90 crore equity shares or 1.6%. Jhunjhunwala picked Canara shares in August last year with 2.85 crore equity shares or 1.59%.
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