Buy Canara Bank Ltd - Motilal Oswal

Canara Bank (CBK IN; Mkt Cap USD5.4b, CMP Rs602, Buy)

Loans grew 6.5% QoQ and 29% YoY to Rs1.9t. Key drivers for loan growth were infrastructure loans, retail loans and SME loans.

Deposits grew 6% QoQ and 25% YoY to Rs2.6t. Reported CASA ratio stood at 30.5% v/s 30.1% a quarter ago. CASA deposits grew 28% YoY.

NIM for 3QFY11 stood at 3.21% v/s 3.16% in 2QFY11 and 2.71% in 3QFY10. Decline in cost of deposits (3bp QoQ).

While reported operating profits grew just 3% YoY, core operating profits grew 44% YoY (+5% QoQ) led by strong NII growth.

The bank reported second pension deficit liability at Rs22b, which it plans to amortize over a period of five years. It has provided Rs3.4b in 9MFY11.

Sustainability of core operating profits will drive re-rating. The stock trades at 1.3x FY12E BV and 1.1x FY13E BV. Buy with a target price of Rs800 (1.4x FY13E BV).

Source : Equity Bulls

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