First Read Canara Bank: Steady performance; Stable asset quality

研报英文原文证据摘录

First Read Canara Bank: Steady performance; Stable asset quality

Forecast returns

Forecast price appreciation 25.7%

Forecast dividend yield 3.9%

Forecast stock return 29.6%

Market return assumption 12.0%

Forecast excess return 17.7%

Company Description

Canara Bank (CBK) is a large public-sector bank in India, with a network of more than 9,800

domestic branches. It has c60% of branches in semi-urban and rural areas and c57% of the

book caters to the retail, agriculture and MSME (RAM) segment. The government holds a

63% stake in the company. The bank had a deposit base of Rs14.6trn and a loan book of

Rs10.5trn at the end of March 2025. It reported a tier 1 capital ratio of 14.4% as of March

2025.

Valuation Method and Risk Statement

We value Canara Bank on the SOTP model, valuing the core bank on the residual income

model.

Although we expect economic growth to remain healthy, a sustained economic slowdown

could impact India’s banking and finance sector (including banks and NBFCs in our coverage

universe) on several fronts. It may lead to a slowdown in credit, increase the risk of non-

performing loans/non-performing assets (NPLs/NPAs), impact fee income and pressure NIM.

An increase in deposit cost could put pressure on margins, and we expect stable-to-declining

margins for banks we cover. A sharp drop in lending rates could also exacerbate the potential

decline in margins and profitability. We will remain watchful of the performance of the MSME

segment and expect corporate asset quality to remain stable but exposure to large leveraged

corporates remains a risk, and a default by a large corporate could significantly impact some

banks in our coverage. Potential downside risks also include high crude oil prices and global

uncertainties due to US tariffs.