On Wednesday, BofA Securities revised its price target for Canara Bank (CBK:IN), dropping it from INR145.00 to INR140.00, while upholding a Buy rating on the stock. The adjustment follows the bank's reported performance for the second quarter of the fiscal year 2025.
Canara Bank achieved a profit after tax (PAT) of Rs40.1 billion, marking a 3% increase from the previous quarter and an 11% rise year-over-year, surpassing expectations. The bank's stronger performance was attributed to increased non-interest income, controlled operating expenses, and stable credit costs. The bank experienced a quarterly loan growth of 3.8%, driven primarily by retail lending, which aligns with the trends seen amongst public sector bank (PSB) peers. However, deposit growth was more modest at 0.9% quarter-over-quarter.
The bank has demonstrated a consistent risk profile with quarter-over-quarter declines in slippages, while credit costs remained flat at 91 basis points due to more conservative provisioning. The provision coverage ratio (PCR) also saw improvement, reaching 91%. These metrics are reportedly in line with the performance of peer PSBs.
Management at Canara Bank has reaffirmed its fiscal year 2025 guidance, which includes credit growth of 1-3%, a credit cost of over 100 basis points, and a return on assets (RoA) between 1.0% and 1.1%. This outlook reflects the bank's stable financial position and its expectations for continued growth within the parameters set for the year.
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