Published on 16/03/2017 11:47:15 AM | Source: Reliance Securities Ltd
Buy Canara Bank Ltd For Target Rs.360.00 - Reliance Sec
STOCK IN FOCUS
*Canara Bank closed 1.5% higher, outperforming benchmark NIFTY, which closed flat.
* Despite tough scenario, Canara Bank has delivered an improved performance on key asset quality parameters in last three quarters. Slippages dipped to Rs22.3bn in 3QFY17 vs. Rs24.5bn & Rs38.8bn in 2QFY17 & in 1QFY17, respectively. Total gross NPAs and standard restructured loan declined to 13.6% of loan vs. 13.9% in 1QFY17. Further, its PCR improved to 52.5% in 3QFY17 from 50.8% in 1QFY17.
* We believe that the Bank has been able to clean-up its loan book effectively, which reasonably assures us that it will continue to surprise positively on operating and asset quality fronts from FY18E onwards
*The Bank has come out with Right Issue of Rs11.2bn out of which Rs9.8bn will come from the GoI and the rest from other shareholders. Further, it will raise Rs25bn from AT1 bond in next 18-24 months to support its growth plan.
* Further, with higher dependency on bulk deposits, we believe that the Bank will be one of the key beneficiaries of recent demonetization drive.
* We reiterate our BUY recommendation on the stock with an unrevised Target Price of Rs360.
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