Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Canara Bank
Raise capital via QIP; Attractive risk-return; Buy
Canara Bank: Raised US$442mn via QIP
Canara Bank has raised ~Rs20bn (US$442mn) via QIP to augment their capital
base and fund future growth opportunities. This is 7.5% dilution (post-money). The
QIP was done at Rs604/shr, which was at a discount of ~3% from CMP. The
Government’s holding in the bank will come down to 67.7% from 73.2% post the
QIP. We est. the bank’s Tier 1 will increase by ~150bps post QIP issue, to ~10%.
Earnings to grow +19/22%; Risk-return remains attractive
We have tweaked our earnings by <2/1% for FY12/13 factoring in the capital
raise. We now expect earnings to grow +19/22% in FY12/13. However, net profit
is estimated to grow at +27/22% yoy in FY12/13, driven by +23-24% loan growth
and margins holding up yoy owing to capital raising. The stock, trading at +1.4-
1.5x FY12 book, should re-rate to 1.6x FY12 book, owing to an attractive riskreturn
(RoEs at +23%). RoAs to rise to 1.5% in FY12 from 1.2% in FY10.
Asset quality: remains manageable
Canara Bank’s asset quality remains manageable, with gross NPLs at 1.4% and
net at 1.0%, with prov. cover at +75%. NPL formation at ~Rs5bn in 3Q.
Restructured book stands at 4.6% of loans (slippages to NPLs at <8%). We
estimate net NPL formation at Rs2.5bn in 4QFY11 vs. Rs4.3bn in 9MFY11.
Capital raise to mitigate margin pressure in FY12
Canara Bank’s margins were estimated to decline by +8-10bps, yoy, owing to a
mismatch in rate hikes (lending and deposit) and also a drag owing to lower the
CASA base (31%) and high share of bulk deposits (20% of total). However,
capital raising and relatively lower LDRs (72%) should mitigate the margin
pressure in FY12 and, hence, we estimate margins should remain flat, yoy, in
FY12 at 2.9%
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Canara Bank
Raise capital via QIP; Attractive risk-return; Buy
Canara Bank: Raised US$442mn via QIP
Canara Bank has raised ~Rs20bn (US$442mn) via QIP to augment their capital
base and fund future growth opportunities. This is 7.5% dilution (post-money). The
QIP was done at Rs604/shr, which was at a discount of ~3% from CMP. The
Government’s holding in the bank will come down to 67.7% from 73.2% post the
QIP. We est. the bank’s Tier 1 will increase by ~150bps post QIP issue, to ~10%.
Earnings to grow +19/22%; Risk-return remains attractive
We have tweaked our earnings by <2/1% for FY12/13 factoring in the capital
raise. We now expect earnings to grow +19/22% in FY12/13. However, net profit
is estimated to grow at +27/22% yoy in FY12/13, driven by +23-24% loan growth
and margins holding up yoy owing to capital raising. The stock, trading at +1.4-
1.5x FY12 book, should re-rate to 1.6x FY12 book, owing to an attractive riskreturn
(RoEs at +23%). RoAs to rise to 1.5% in FY12 from 1.2% in FY10.
Asset quality: remains manageable
Canara Bank’s asset quality remains manageable, with gross NPLs at 1.4% and
net at 1.0%, with prov. cover at +75%. NPL formation at ~Rs5bn in 3Q.
Restructured book stands at 4.6% of loans (slippages to NPLs at <8%). We
estimate net NPL formation at Rs2.5bn in 4QFY11 vs. Rs4.3bn in 9MFY11.
Capital raise to mitigate margin pressure in FY12
Canara Bank’s margins were estimated to decline by +8-10bps, yoy, owing to a
mismatch in rate hikes (lending and deposit) and also a drag owing to lower the
CASA base (31%) and high share of bulk deposits (20% of total). However,
capital raising and relatively lower LDRs (72%) should mitigate the margin
pressure in FY12 and, hence, we estimate margins should remain flat, yoy, in
FY12 at 2.9%
No comments:
Post a Comment