Canara Bank stock surges 10%, hits 21-month high in a subdued market

Shares of Canara Bank hit a 21-month high of Rs 214.50 after they rallied 10 per cent on the BSE in Friday’'s intra-day trade on the back of heavy volumes. The stock of the state-owned bank was trading at its highest level since January 2020.

At 11:45 am, Canara Bank was trading 9.6 per cent higher at Rs 214.20, as compared to a 0.11 per cent decline in the S&P BSE Sensex. In the past one month, it has surged 28 per cent, as against a 0.89 per cent gain in the benchmark index. A combined 35.81 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

For July-September quarter (Q2FY22), Canara Bank had posted a 200 per cent rise in net profit at Rs 1,333 crore on robust growth in non-interest income including revenue from trading and recoveries. It posted a net profit of Rs 444 crore in the year-ago quarter.

The lender's non-interest income was up 37.54 per cent YoY to Rs 4,268 crore in Q2FY22 from Rs 3,103 crore a year ago. Its asset quality profile was broadly stable though. Gross non-performing assets (NPAs) rose to 8.42 per cent this September from 8.23 per cent a year ago. Net NPAs reduced to 3.21 per cent in September 2021 from 3.42 per cent a year ago. Its provision coverage ratio improved to 82.44 per cent at end of Q2FY22 from 81.48 per cent at end of Q2FY21.

In its presentation, the management of Canara Bank had said that it is working to reduce GNPAs to 7.9 per cent and net NPAs to 2.8 per cent by March 2022. It has also guided for improvement in PCR to 83.95 per cent by end of FY22.

"Higher-than-expected slippages of Rs 6,900 crore or 4.5 per cent of loans came in as an irritant, but they included the lumpy SREI Group (Rs 3,200 crore) for which the bank has made a 50 per cent provision. However, higher recoveries/upgrades led to a marginal reduction in GNPA to 8.4 per cent. The restructured pool was down to Rs 18,100 crore or 2.9 per cent of loans, with no further pipeline," analysts at Emkay Global Financial Services said in result update.

It added: Merger/asset-quality related concerns are largely behind us, and the bank should report a gradual improvement in its RoA/RoE to 0.4-0.6 per cent/9-13 per cent over FY22-24E from 0.3 per cent/6 per cent in FY21.

Meanwhile, on October 6, 2021, Moody's Investors Service (Moody's) affirmed the 'Ba1' long-term local and foreign currency deposit ratings of four state-owned banks including Canara Bank, as well as their 'b1' BCAs. Their rating outlook has been changed to stable from negative.
 
"The affirmation of ratings and BCAs, and change in outlook to stable from negative, reflect the fact that despite the significant economic challenges since the onset of the pandemic, their asset quality has only deteriorated modestly while capital has improved," Moody's said.

Ace investor Rakesh Radheshyam Jhunjhunwala held 29.10 million equity shares or 1.6 per cent stake in Canara Bank as on September 30, 2021, according to the shareholding pattern data filed by the Bank.