Canara Bank
Analysts said the overall credit growth was healthy and in line with the system at 10 per cent YoY but margins were largely flat at 2.8 per cent due to interest reversal on account of higher slippages. Slippages came in at Rs 4,760 crore, which was 3 per cent of loans and that excluded
exposure of Rs 1,200 crore on which the bank carries a 60 per cent provision coverage ratio.
Canara Bank indicated that the potential notional loss as of now on its investment portfolio seems to be limited to Rs 200 crore, but
believes rising G-sec yields could keep treasury performance in check.
“We expect a gradual improvement in RoA/RoE to 0.6-0.7 per cent/12-15 per cent over FY23-25 from 0.5 per cent/11 per cent in FY22, led by better growth and lower LLP. Retain Buy with a revised target of Rs282 against Rs290,” it said.
Motial Oswal said while the corporate book saw a small decline, the bank has continued to grow RAM segment at a steady pace with contribution from all segments.
“Despite elevated slippages, asset quality ratios improved further underpinned by higher recoveries and upgrades. Declines in SMA overdue and restructured portfolio provide incremental comfort on asset quality trends,” it said while suggesting a target of Rs 280.
The average target price on the stock has increased to Rs 247 level post the quarterly results from about Rs 232 level a month ago, Trendlyne suggests.
On Tuesday, the scrip was trading at Rs 203.90, suggesting a potential 21 per cent upside.
Jhunjhunwala upped his stake in the bank in March quarter to 1.96 per cent from 1.6 per cent in December quarter.
Federal Bank
Institutional Equities said Federal Bank’sQ4FY22 earnings missed its estimates, largely on account of accelerated absorption of family pension expenses, but these were partly offset by multi-quarter low credit costs (20bps).
“Margin moderated on the back of income reversal from slippages in the agri portfolio. But asset quality continued to impress, with negative net slippages and a 20bps sequential decline in the restructured book (2.4 per cent). We tweak our FY23E/FY24E earnings marginally to factor in near-term margin outcomes and higher opex from
continued investments; we maintain BUY, with a revised target price of Rs 126,” the brokerage said.
Nirmal
said it would expect treasury gains to be unsupportive from here on given the increasing interest rate environment. That said it sees NIM recovering from here on.
“Further, the cost/income ratio is also expected to improve to 50 per cent. The bank continues its execution in establishing fintech partnerships, which are expected to aid growth on both sides of the balance sheet. The bank is targeting credit growth of 15 per cent in FY23, mostly led by the retail segment while it would remain selective in pursuing corporate credit opportunities,” Nirmal Bang said.
Emkay Global said the overall credit growth was sub-par vis-a-vis peers due to relatively moderate retail growth and conscious run-down of short-term corporate credit. This brokerage has cut its target on the stock to Rs 125 from Rs 130 earlier.
The average target price on the stock stands at Rs 117, suggesting potential 25 per cent upside over Tuesday’s price of Rs 93.95. Jhunjhunwala and his better half Rekha owned 3.7 per cent stake in the bank.
Meanwhile, Jhunjhunwala also owned 4.5 per cent stake in
. This lender is yet to report its quarterly numbers.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
