Canara Bank share price target: Can this PSU banking stock rerate further post Q4 results? 

Canara Bank's March quarter results came in line with Street expectations. Despite an increase in cost of funds, Canara Bank's Q4 net interest margin (NIM) expanded, though marginally, which was a result of the PSU lender's gradual efforts to rejig exposure of older low yielding corporate book by either renewing them at current yields or by replacing them with other products that offer more favourable returns. All eyes would be on provision reversal going ahead, anlaysts said.

Motilal Oswal said Canara Bank reported healthy but in-line earnings, led by higher other income, which was partially offset by higher-than-expected provisions. Healthy NII growth led to a 4 basis points QoQ margin expansion.

"However, the management expects NIMs at 2.9-3 per cent in FY25. Loan growth was led by the retail segment. Deposit growth has gained pace, driven by CASA deposits, and the outlook remains encouraging. Fresh slippages increased sequentially; however, overall asset quality ratios improved. We broadly maintain our earnings estimates and expect Canara Bank to deliver FY26 RoA/RoE of 1.1 per cent/18.4 per cent," said Motilal Oswal Securities.

The brokerage has reiterated its 'Buy' rating on the stock with a target price of Rs 650. On Thursday, the stock was trading 0.32 per cent higher at Rs 559.90 on BSE.

JM Financial said the management expects employee costs to stabilise hereon. It sees cost-to-income ratio to be restricted at 47 per cent.

"Asset quality metrics continued to improve and PCR was at a healthy 71 per cent. With the bank consistently maintaining stable NIMs, ongoing moderation in credit costs and sustained RoA of 1 per cent for several quarters, we expect Canara Bank rerating to continue going ahead. We build in RoA/ROE of 1.02 per cent/16.7 per cent by FY26E. We maintain BUY with a revised target price of Rs 600," it said..

Kotak Institutional Equities said loan growth was lower than industry growth and a bit subdued at 11 per cent YoY while NIM was broadly flat. It said asset quality is comfortable, but bad loan recoveries are on a declining trend.

This brokerage has a fair value of Rs 530 on Canara Bank.

"We value the bank at 1x March 2026E adjusted book with RoEs of 15-16 per cent in the medium term. Return ratios for Canara Bank have improved recently driven by declining credit cost and strong recoveries from written-off accounts. Going into FY2025E, we expect the pressure on NIM to sustain and recoveries from written-off accounts are likely to decline. While the bank might be able to offset most of the RoA drag through further decline in credit cost, the trend on provision reversals will be a key monitorable," it said.