Motilal Oswal Financial Services Ltd (MOFSL) said Canara Bank reported standalone profit after tax (PAT) of Rs 5,170 crore in the second quarter of FY27, up 8 per cent year-on-year (YoY) and 7 per cent quarter-on-quarter (QoQ). The result was 8 per cent above the brokerage's estimate, supported by lower-than-expected provisions and operating expenses.
Net interest income (NII) rose 20 per cent YoY and 8 per cent QoQ to Rs 11,000 crore, exceeding MOFSL's estimate by 3 per cent. The bank's net interest margin (NIM) improved by 3 basis points (bps) QoQ to 2.55 per cent, in line with expectations.
MOFSL noted that Canara Bank retained its FY27 NIM guidance of 2.5-2.6 per cent. It maintained a 'Buy' call with a target price of Rs 160.
JM Financial upgraded Canara Bank to 'Buy' from its earlier rating and raised its target price to Rs 150 from Rs 142, citing attractive valuations and improving fundamentals.
The brokerage noted that the stock had remained flat over the past year despite around 14 per cent growth in book value. It also said insurance fee income accounted for around 2 per cent of the bank's FY26 profit before tax (PBT), compared with 5 per cent for JM Financial's coverage universe, making the potential impact of the IRDAI paper a relatively smaller risk for the lender.
JM Financial raised its FY27 and FY28 earnings per share (EPS) estimates by 6 per cent and 5 per cent, respectively. It expects the bank to deliver a return on assets (RoA) of around 1 per cent and a return on equity (RoE) of 17.6 per cent over FY27-FY29.
The brokerage retained its valuation multiple of 0.9 times FY28 estimated adjusted book value (ABV) for the core banking business.
Elara Capital recommended a 'Buy' on Canara Bank, with a target price of Rs 155, valuing the stock at 0.9 times its estimated ABV for September 2028. The brokerage said the stock was trading at an attractive valuation of 0.8 times its September 2028 estimated ABV.
Elara noted that the bank's profitability remained skewed towards non-core income, although net interest margins were gradually improving. It added that asset quality remained benign, with credit costs under control, supporting a sustained RoA of 1-1.1 per cent.
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