Canara Bank | Q3FY15 | Asset quality deteriorates further, albeit, at a slower pace as compared to last two quarters; await more details on quality of assets :: IndiaNivesh

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Sell Canara Bank between Rs 429.55 to Rs 445. Stoploss at Rs 460 ::HDFC Sec, report

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Core performance disappoints Canara Bank :: HDFC Sec, report

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Sell Canara Bank , Engineers India ::HDFC Securities

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Canara Bank | Q2FY15 First Cut Analysis | Performance was below expectation as asset quality pressure continues to persist :: IndiaNivesh

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Anand Rathi - Canara Bank - Core earnings, asset quality weak; Sell

Canara Bank - Core earnings, asset quality weak; Sell

Key takeaways

Weak credit growth; CASA share and NIM decline. While Canara Bank’s advances rose 10.8% yoy (3.2% qoq), deposits grew faster, at 14.2% yoy, thereby decreasing credit-deposit 199bps yoy to 65.4%. Advances growth was driven by the priority sector (27.3% yoy) and farm loans (38% yoy). While NIM fell 17bps yoy (3bps qoq) to 2.2%, the proportion of CASA decreased 16bps yoy (106bps qoq) to 23.1%.

Modest fee income, robust trading profits, declining productivity. While fee income grew 16.2% yoy (3% qoq), trading profits rose 349% yoy to `4.4bn and comprised 23.4% of pre-provisioning profits (7.1% in 1QFY13). Productivity worsened, with core cost-to-income increasing 92bps yoy to 47.8%. With modest business growth prospects, fee income and operating leverage are unlikely to improve substantially. Over FY13-15, we expect fees to post a 15.7% CAGR, with cost-to-assets at ~1.3%.

Asset quality worsens, large loan restructuring, low NPA coverage. Gross NPA grew 17.1% qoq, with fresh slippages of `26.9bn (annualised, 4.5% of loans). NPA coverage fell 41bps qoq to 15.3% and is still the lowest of peers. In 1QFY14, `16.8bn of loans were restructured, with total restructured loans at `199bn (8% of loans).

Our take. Due to lower credit growth and higher NPA assumptions, we slash our FY14 and FY15 net profit estimates 33.1% and 28.4% respectively. Hence, we lower our target from `405 to `239. We maintain our Sell rating, since we expect near-term profitability to be constrained by sluggish business and weak asset quality.Also, the RBI's recent liquidity-tightening measures are a valuation overhang. While the present valuation appears to price in asset-quality concerns, persistingperceptions of default risk would restrict a valuation re-rating. At our Mar’14 target, the stock would quote at PABV of 0.6x FY14e and 0.5x FY15e. Our target is based on the two-stage DDM (CoE: 14.5%; beta: 0.9; Rf: 8%). Risks. Faster credit growth, sharp decline in defaults.

 Click here to access the report

Thanks & Regards Anand Rathi Institutional Research

Consider going long on Canara Bank: Business Line

Asset quality overhang remains a worry for Canara Bank :: Business Line

The RBI’s decision to refrain from a cut in cash reserve ratio (CRR) may signal disappointment for banking stocks. A cut, if it had materialised, may have lowered the cost of funds for banks which are facing margin pressures, from declining lending rates and still-high deposit rates. Challenges such as this may be particularly acute for banks such as Canara Bank, which have been growing at a slower rate than the industry. The time may be ripe to book profits on the stock.

Canara Bank has been witnessing loan growth that is below industry levels in recent times. In 2012-13, loan growth for the bank stood at four per cent far below the industry growth of 14 per cent.

While loan growth remains a concern, the bank has also seen relatively low deposit growth of 8.8 per cent during 2012-13. This has been partly on account of its conscious strategy to shed high cost deposits. From a contribution of 34 per cent in 2011-2012, the high cost deposits now constitute 15 per cent of the total deposits. While this should have aided margins on account of lower cost of funds, net interest margins (NIMs) declined in 2012-2013 by 11 basis points to 2.39 per cent.

This is due to sluggish growth in the low-cost current account savings account (CASA) deposits at eight per cent. Thus, the CASA ratio as per cent of deposits remains low at 25 per cent. The cost of funds continued to increase during 2012-13, offsetting the marginal increase in yields.

While the entire banking sector continues to face liquidity crunch, with a credit deposit ratio at 77 per cent, Canara Bank has a lower ratio of 68 per cent. This indicates the bank’s inability to significantly grow its loan book. It also maintains higher statutory liquidity ratio (SLR) investments. As of March 2013, the SLR as a per cent of deposits stood at 28.6 per cent, higher than the stipulated RBI’s level of 23 per cent. Asset quality overhang remains a main concern for the bank as well. Canara Bank’s gross non-performing assets deteriorated from 1.7 per cent to 2.6 per cent of loans in 2012-13. The restructured assets remain high at 7.5 per cent of the loans as of March 2013. The tier-I capital adequacy at 9.7 per, shows that Canara Bank will require further capital infusion in 2013-14, to meet Basel-III norms.

The stock trades at 0.7 times its one-year forward book value, which is lower than its historical average of 1.1 times. However, on a price to adjusted book basis (book value adjusted for net non performing assets) the stock trades at 0.9 times. Modest growth outlook and further delinquencies on loans make it a less preferred stock in the public sector space.

Canara Bank: Growth takes precedence ::Kotak Sec

Canara Bank (CBK)
Banks/Financial Institutions
Growth takes precedence. After a period of consolidation, Canara Bank has stepped
up growth (11% qoq in loans), much to our disappointment. NIM was stable as the
benefit of declining cost of funds was largely passed to borrowers. Loan impairment
was high and driven by corporate loans. We continue to maintain our REDUCE rating
with TP at `415 (unchanged) and view the recent shift in strategy to growth under the
new management as a key concern. Earnings are likely to remain volatile given the
high-duration investment portfolio and skewed corporate loan exposure.

Sizzling Stocks: Canara Bank, HDIL :: Business Line

Sizzling Stocks: Canara Bank (Rs 430)

Canara Bank skyrocketed 26 per cent, accompanied by good volume last week. Most banking stocks witnessing buying interest after the Reserve Bank of India cut cash reserve ratio (CRR) by 0.25 per cent to 4.50 per cent on Monday. The stock jumped 9 per cent on September 18, breaking through its key resistance and intermediate-term down trend-line around Rs 365. The stock is currently testing key resistance at Rs 433.

Short-term trend has been up for the stock from its 52-week low registered at Rs 306 on August 30. Following a near-term corrective decline , the stock can breakthrough its key resistance at Rs 433 and climb to Rs 450 in the weeks ahead. Next important resistance is in the band between Rs 475 and Rs 480. Medium-term key resistances are pegged at Rs 510 and Rs 560. Short-term supports for the stock are positioned at Rs 400 and Rs 385. Only a strong fall below Rs 385 will pull the stock down to Rs 365 or Rs 350.

Sept 9:Technicals: SAIL, Monsanto, Ingersoll Rand, A2Z Maintenance, Welspun, Canara Bank:: Business Line

Canara Bank: Weak growth and deteriorating asset quality drags profitability In Q1FY13,:: Karvy

Weak growth and deteriorating asset quality
drags profitability
In Q1FY13, Canara Bank’s performance came in below our expectations
with PAT growing at 6.8% YoY (down 6.5% QoQ) to Rs7.75 bn, owing to
weak growth in advances at 4.9% YoY (down 3% QoQ). NIMs declined 10
bps QoQ to 2.4%, Asset quality continued to deteriorate owing to higher
slippages and restructuring of loans. The bank reported treasury profit of
Rs988 mn against a loss of Rs 770 mn.

Canara Bank (CBK IN) N: 4QFY12 – continuing margin and asset quality woes:: HSBC Research,

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Canara Bank- Huge restructuring pipeline to impact profitability: Emkay

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Angel Broking - Canara Bank - RU4QFY2012- Result Updates - PDF link

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Canara Bank - RU4QFY2012

Technical Query Corner: Titan, canara bank, JSW steel, Rohit Ferro, Crompton Greaves, Honeywell, Bosch, :: Business Line

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Please advise on the outlook for Bosch and Honeywell Automation India. Can I buy and hold them for long-term?

N.S. Ganesan

Bosch (Rs 9,005.9): Bosch continues to be a trail-blazer in 2012 as well. The stock is up 35 per cent so far this year.

The stock is in a strong structural uptrend since the March 2009 low. This uptrend will be threatened only if the stock goes on to close below Rs 6,425. Subsequent supports for the stock would be Rs 6,062 and Rs 5,314.

Medium-term supports for the stock are at Rs 8,164 and Rs 7,501. Investors with short- to medium-term horizon can accumulate the stock on declines as long as it trades above Rs 7,500.

Immediate target for the stock is Rs 10,162. Long-term target for the stock is at Rs 11,032.

Honeywell Automation (Rs 2,477.3): Honeywell Automation is in a long-term down move since the July 2010 peak of Rs 3,010. But this decline has halted at the key long-term support at Rs 1,663 and the stock is once again reversing from its long-term resistance band between Rs 3,000 and Rs 3,300. Investors with short-term perspective can divest their holdings when the stock nears this resistance band.

Medium-term support for the stock is at Rs 2,280 and this can serve as support for medium-term investors. Long-term support for investors is, however, at Rs 1,620. Investors need to start worrying only on a strong close below this level. Long-term target on close above Rs 3,350 is Rs 4,097.

Canara Bank Asset quality to remain an overhang : Macquarie Research

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Canara Bank
Asset quality to remain an overhang
Event
 Maintain Underperform: We expect Canara’s ROE to come down from 23%
seen in FY11 to 15-16% by FY14E driven by lower ROA and leverage.
Maintain Underperform with a revised TP of Rs385
Impact
 Asset quality can worsen further: Amongst our coverage, Canara has the
largest exposure to the private power companies and SEBs; close to 12-13%
of its loans are exposed to the power sector. We expect stressed assets as a
% of net worth to double from 50% in FY11 to 100% in FY13E, driven by large
restructurings in the power sector.
 Falling loans to deposits to exert pressure on margins: In 3Q12,
advances have grown only 15.5% YOY and deposit growth has been healthy
at 20%. We expect the trend to continue going forward as deposits tend to be
stickier than advances growth. We expect loans to grow at ~250bps higher
than deposits over FY12-14E. This gap between deposit growth and credit
growth is likely to exert pressure on margins, as investing term deposits in
government securities is currently yielding a negative carry.
 Poorest deposit franchise: Canara Bank’s CASA at sub-25% levels (fallen
steeply by ~400bps in the last year) is the lowest amongst large banks, and
the bank traditionally has relied on a large quantum of bulk deposits to fund
growth. We believe that bulk deposits rates are unlikely to soften soon, putting
further pressure on NIMs.
 Grossly under-provisioned: The reported NPL coverage ratio in 3Q12 at
18% is perhaps the lowest in the sector. We are extremely concerned about
the bank’s current state of under-provisioning. If we include restructured
advances which stand at Rs96bn (4.4% of overall book), under-provisioning
gets aggravated further. Due to this, we are factoring credit costs to increase
by 60% YOY in FY13
 Management change due in Sept-12: Management changes in PSU banks
have caused a lot of uncertainty, as reflected by past experience, and the
current Chairman is due for retirement in Sept-2012.
Earnings and target price revision
 We reduce our FY13E and FY14E EPS by 12% and 11%, respectively, on
account of higher credit costs and slower growth. We increase our TP by 4%
to Rs385 on account of reduction in the cost of equity.
Price catalyst
 12-month price target: Rs385.00 based on a Gordon Growth methodology.
 Catalyst: Increased slippages and restructuring, margin pressures
Action and recommendation
 Maintain Underperform with revised TP of Rs385

Canara Bank Reco: HOLD CMP: Rs 464 Target Price: Rs 500 :Emkay,

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Canara Bank
Reco: HOLD
CMP: Rs 464
Target Price: Rs 500
Impressive quarter; but hit by one-offs
·      CBK’s NII at Rs19.2bn / Operating profit at Rs15.8bn well on track. However, higher investment dep + PV losses dragged bottomline. Net profit at Rs8.7bn was down 21% yoy
·      Sharp increase in the doubtful assets categories in NPLs from 36% of total to 46%. Lower LLP (30bps) and one-offs in restructured book was a disappointment
·      Loan growth at 16% yoy aided by growth on corporate front. QoQ fall in LDR, lower CASA and declining share of high yielding assets dragged NIM. NIM at 2.54% was -12bps qoq.
·      Raised our earning estimates marginally. Adequate capital for growth with improvement in cash recoveries and lower slippages remain key +ves. Maintain HOLD with TP of Rs500

Canara Bank :: 2QFY2012 Result Update :: Angel Broking

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For 2QFY2012, Canara Bank registered a 15.4% yoy decline in its net profit,
in-line with our expectations. However, provisioning expenses were considerably
higher than expected – offset by stronger NII and healthy rise in other income
(driven by recoveries from written-off accounts and higher trading profits).
We maintain our Accumulate recommendation on the stock.
NIM improves in-line with peers; slippages remain elevated but largely offset by
higher recoveries and aggressive write-offs: For 2QFY2012, the bank’s overall
business momentum remained moderate, with advances increasing marginally by
1.4% qoq (up 23.8% yoy) and deposits accretion rising by 4.1% qoq (up 25.4%
yoy). Saving account deposits growth was relatively healthy at 17.9% yoy;
however, the 5.3% yoy decrease in current account balances pulled down overall
CASA deposits growth to 12.2% yoy. Calculated CASA ratio improved, albeit
marginally by 50bp qoq, to 25.8% (down 305bp yoy). A relatively faster (22bp
qoq) rise in yield on advances vis-à-vis an 8bp qoq rise in cost of deposits led to a
22bp sequential improvement in reported NIM to 2.6%. Other income growth
was robust 65.8% yoy, driven by doubling of recoveries from written-off accounts
and substantially higher trading profits. On the asset-quality front, slippages
continued to remain at elevated levels as the bank completed the migration to
system-based NPA recognition platform. However, the rise in NPAs was largely
contained on the back of higher recoveries and aggressive write-offs. Gross and
net NPA ratios remained largely stable at 1.73% and 1.43%, respectively.
Outlook and valuation: Incremental asset-quality pressures are expected to
moderate going forward, as the bank has completed the migration to
system-based NPA recognition platform. Also, recoveries and upgrades especially
from the recent slippages are likely to pick up going forward, as witnessed in
2QFY2012. At the CMP, the stock is trading at reasonable valuations, in our view,
of 0.9x FY2013E ABV. Hence, we maintain our Accumulate recommendation on
the stock with a target price of `510.

Canara Bank: Completes the migration with limited impact :: Kotak Sec

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Canara Bank (CBK)
Banks/Financial Institutions
Completes the migration with limited impact. Canara Bank completed the last leg
of migration with relatively lesser-than-expected impact on asset quality. Slippages were
at 2.3% (50% migration-related) and the bank has chosen to aggressively write off
these loans resulting in higher provisions. Risks from the infrastructure exposure remain
a key risk, driving our earnings revision. We maintain BUY but believe that near-term
price performance will be muted despite inexpensive valuations of 1X FY2012E book
and 5X FY2012E EPS delivering 6% earnings growth for FY2011-13E and 18% RoEs.