Canara Bank - 3QFY13 Results Update - Motilal Oswal

Canara Bank's 3QFY13 PAT of ~INR7.1b (-19% YoY and +7% QoQ) was 6% above our estimate of INR6.7b. Higher non-interest income (27% above estimate) compensated for higher than expected provisions and tax rate. NII was 3% below estimate (+4% YoY and +2% QoQ to INR19.9b) led by lower-than-expected loan growth (flat both QoQ and YoY). NIMs calculated improved 4bp QoQ to 2.27% (inline est). Key highlights:

- Net slippages remained high at INR11b v/s INR12.8b in 2QFY13. GNPAs/NNPAs grew 9%/12% QoQ and PCR, including write-offs stood at 61%.

- CBK restructured loan of INR8.7b during the quarter. However, repayment of INR12.5b, took cumulative restructured loans (facility-wise) to INR145b v/s INR149b a quarter ago. OSRL stood at INR134b (6.1% of loans facility-wise).

- Non core income (forex + trading + recoveries + MTM on investment) stood at INR4.2b (v/s INR3.3b) in 3QFY13 and INR9.3b (v/s INR8b) in 9MFY13.

- CASA deposits grew 8% YoY (down 3% QoQ) led by 8% YoY growth in SA deposits (down 3% QoQ). CASA ratio improved marginally to 25%.

Valuation and view: CBK has aggressively built up investment portfolio, leading to higher share of trading (including AFS gains) in the profitability. With expected revival of growth from FY14 onwards, asset reallocation will be positive for margins, further, benefit on cost of funds (due to fall in above card rate deposits) will aid margin improvement in FY14. RoA and RoE will be healthy at 0.8%/16% over FY14-15E. Maintain Buy.

Source : Equity Bulls

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