Canara Bank - Slippages continue to remain steep - Emkay

Reco: REDUCE
CMP: Rs 420
Target Price: Rs 380

- CBK's Q2FY13 NII at Rs19.6bn better than expected, PAT at Rs6.6bn lower than expected led by lower other income. Slippages at Rs19.2bn continue to surprise negatively

- Despite lower bulk deposit rates, NIMs dipped by 5bps qoq to 2.35% as the LDR dipped by 330bps qoq to 64%. The loan book shrank by 4% qoq

- Stressed assets addition remained steep - slippages at Rs19.2bn and new restructuring at Rs6.1bn. We build steep credit costs (86bps) with 2.4% slippage rate for FY13

- Low margins, high credit cost, very high AFS portfolio with higher duration makes us extremely wary of quality of earnings. Maintain REDUCE with TP of Rs380

Source : Equity Bulls

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