Canara Bank results preview: How Jhunjhunwala-backed PSU lender may fare in Q3?

Jhunjhunwala-backed Canara Bank is set to report its results for three-months and nine-months ended on December 31, 2024 later today. Brokerages tracking the counter are expecting a muted performance from the state-run lender considering modest growth and higher cost of funds.

Analysts tracking the PSU-lender believe that Canara Bank may report a mild increase in net interest income (NIIs) on both year-on-year (YoY) and quarter-on-quarter (QoQ) basis. Pre-provisioning operating profit (PPOP) may fall to a higher single digits while net interest margins (NIMs) may contract marginally. Net profit may also take a hit slightly.

Besides that management commentary on rising cost of funds, slippages, asset quality and business growth for the lender shall be key factors to track. Also, the lender is gearing up to list its asset management business as a separate entity.

Kotak Institutional Equities is likely to report NIIs at Rs 9,529.3 crore, modestly up on both QoQ and YoY basis, while PPOP is seen at Rs 7,130 crore, up 4.8 per cent YoY and down 6.8 per cent QoQ. NIMs may contract to 2.5 per cent for the quarter, while PAT is seen at Rs 3,733.4 crore, falling 7 per cent QoQ but up 2.1 per cent YoY in the given quarter.

Shares of Canara Bank dropped about 1.5 per cent in the early trading to Rs 95.30 on Monday. The total market capitalization of the state-run lender managed to hold Rs 87,500 crore. The lender had tumbled more than 25 per cent from its 52-week high at Rs 129.35 hit in June 2024.

"We expect the bank to report a modest 2 per cent YoY earnings growth, led by a modest 4 per cent YoY growth in operating profit. NIM is expected to see a modest sequential decline, driven by a marginal increase in cost of deposits. We do not expect any major surprise on asset quality in this quarter. Credit cost is likely to be higher than most peers," Kotak added.

Equirus Securities pencils NIIs to come in at Rs 9,527.3 crore, marginally higher on both YoY and QoQ basis. Pre-provisioning income is seen at Rs 7,467.5 crore, falling slightly 2.4 per cent QoQ but up 9.7 per cent YoY. NIMs may contract marginally to 2.9 per cent for the quarter, while net profit may come in at Rs 3,917.8 crore, falling 2.4 per cent QoQ but up 7.2 per cent YoY.

Equirus expects business growth to be marginally below industry average. It also sees NIMs to marginally compress, with asset quality remaining stable. "Management's comments on asset quality and trends in business growth shall be the key things to look for," said the brokerage with an 'add' rating and a target price of Rs 120 apiece.

The Estate of Late Rakesh Jhunjhunwala owned 12,86,93,000 equity shares, or 1.42 per cent stake in the lender as of December 2024 quarter. This stake in the lender stood at Rs 1,245.10 crore as of previous close. This stake has remained unchanged from the preceding September 2024 quarter.

Antique Stock Broking sees inter interest income to come in at Rs 9,705.4 crore, up 3.1 per cent YoY and 4.2 per cent YoY. PPOP may come in at Rs 7,396.8 crore, up 8.7 per cent YoY but down 3.4 percent sequentially. Net profit may come in at Rs 3,951 crore, up 8.1 per cent YoY but marginally down on a sequential basis.

B&K Securities pencils Canara Bank's revenue at Rs 14,034.4 crore for the quarter, flat on both QoQ and YoY basis. Ebitda margins may improve 240 bps to 52 per cent in the given quarter. Adjusted PAT is seen at Rs 3,781.2 crore, up 3.4 per cent YoY but down 5.8 per cent QoQ. It currently has a 'hold' rating on the stock.