LKP Securities has predicted a bullish target of ₹506 for Canara Bank, which is currently valued at ₹384.25. This optimism comes on the back of the bank's unbroken net profit growth for thirteen consecutive quarters, ending with a 42% year-on-year jump in Q2-FY24.
This significant leap in profits was primarily driven by lower provisioning expenses, following a substantial provision of ₹5,400 crore made earlier. The bank's improving asset quality was also reflected in an enhanced Gross Non-Performing Assets (GNPA) to Net Non-Performing Assets (NNPA) ratio, stable slippages of ₹2,900 crore, and a marginal decrease in the slippages ratio to 137 basis points annualised from 163 basis points previously.
The cumulative Special Mention Account (SMA) 1/2 book remained steady at 11 basis points/48 basis points of the loan book. The bank also reported robust net credit growth, with recoveries aligning with guidance. The anticipated credit cost for FY24 is expected to be below 2%, coupled with stable Net Interest Margins (NIMs) at 3.02%.
Looking ahead, Canara Bank forecasts an increase in profitability with estimated Return on Assets (ROA) and Return on Equity (ROE) for FY25 poised at 1.1% and 17.2% respectively. These factors together have contributed to LKP Securities' bullish stance on the bank's future performance.
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