Canara Bank - March 2013 Results Preview - Motilal Oswal

- On a sequential basis though loan growth is expected to be strong, it would be just 3% YoY. This would be driven by the strategy to consolidate and de-bulk its balance sheet.

- Margins are likely to improve by 15bp+ led by 1) re-pricing of deposits and 2) reduction in proportion of high cost bulk deposits. Further improvement in CD ratio, which is low at 67.4%, could provide a cushion.

- Fee income is expected to be sub 10%; however, higher trading gains YoY will drive overall non-interest income growth to ~12%.

- Slippages are likely to remain at a high level; however, an improvement in upgradation and recovery would provide a cushion.

- The stock trades at 0.6x FY14E and 0.6x FY15E BV, and 4.8x FY14E and 4x FY15E EPS. Maintain Buy.

Source : Equity Bulls

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