markettrend766
28-09-2008, 09:47 AM
Canara Bank LTD
CMP 194
Price target: Rs.275
TIME HORIZON 12 MONTHS
Q4FY2008 PAT higher than expected
Result highlights
• Canara Bank has reported a profit after tax (PAT) of Rs464.1 crore for Q4FY2008, reflecting a decline of 8.1% year on year (yoy). The reported PAT is marginally above our expectation of Rs451.1 crore.
• The top line performance is disappointing with the net interest income (NII) declining by 12.9% yoy to Rs922.5 crore owing to pressure on the margins and a muted advances growth.
• The non-interest income provided some relief with a 14.1% growth yoy.
• The operating expenses grew by 10.1% to Rs697.6 crore during the quarter. The growth in the operating expenses can be traced to a 30.9% jump in the other operating expenses. Meanwhile, the staff expenses declined by 4.3% yoy.
• Despite the other income growth coupled with lower operating expenses, the pre-provisioning profit was down 10.7% yoy.
• Notably, the provisions continued their declining trend. The provisions and contingencies stood at Rs375.1 crore, down 24.5% yoy. The lower provisions coupled with a positive growth in the non-interest income helped the bank check the decline in the profitability.
• The asset quality of the bank remained healthy with an improvement on absolute and relative basis. The gross non-performing asset (GNPA) percentage came in at 1.31%, down 20 basis points yoy, while the net non-performing asset (NNPA) percentage was down 10 basis points to 0.84%.
• The capital adequacy ratio was healthy at 13.25% as at end of March 2008, largely in line with the year-ago level of 13.50%.
• Growth in advances was muted at 8.9% as the bank focussed on rebalancing its advances book. In line, the deposit growth was muted at 8.2% yoy.
• At the current market price of Rs194, Canara Bank trades at 3.96x 2009E earnings per share and 0.74x 2009E book value. The stock is trading at below with its 2009E book value making it an attractive buy. We maintain our Buy recommendation and price target of Rs275 on the stock.
CMP 194
Price target: Rs.275
TIME HORIZON 12 MONTHS
Q4FY2008 PAT higher than expected
Result highlights
• Canara Bank has reported a profit after tax (PAT) of Rs464.1 crore for Q4FY2008, reflecting a decline of 8.1% year on year (yoy). The reported PAT is marginally above our expectation of Rs451.1 crore.
• The top line performance is disappointing with the net interest income (NII) declining by 12.9% yoy to Rs922.5 crore owing to pressure on the margins and a muted advances growth.
• The non-interest income provided some relief with a 14.1% growth yoy.
• The operating expenses grew by 10.1% to Rs697.6 crore during the quarter. The growth in the operating expenses can be traced to a 30.9% jump in the other operating expenses. Meanwhile, the staff expenses declined by 4.3% yoy.
• Despite the other income growth coupled with lower operating expenses, the pre-provisioning profit was down 10.7% yoy.
• Notably, the provisions continued their declining trend. The provisions and contingencies stood at Rs375.1 crore, down 24.5% yoy. The lower provisions coupled with a positive growth in the non-interest income helped the bank check the decline in the profitability.
• The asset quality of the bank remained healthy with an improvement on absolute and relative basis. The gross non-performing asset (GNPA) percentage came in at 1.31%, down 20 basis points yoy, while the net non-performing asset (NNPA) percentage was down 10 basis points to 0.84%.
• The capital adequacy ratio was healthy at 13.25% as at end of March 2008, largely in line with the year-ago level of 13.50%.
• Growth in advances was muted at 8.9% as the bank focussed on rebalancing its advances book. In line, the deposit growth was muted at 8.2% yoy.
• At the current market price of Rs194, Canara Bank trades at 3.96x 2009E earnings per share and 0.74x 2009E book value. The stock is trading at below with its 2009E book value making it an attractive buy. We maintain our Buy recommendation and price target of Rs275 on the stock.