Motilal Oswal has maintained a bullish stance on Canara Bank, assigning a BUY rating and setting a target price of ₹135, which represents an approximately 20% increase from the current market price. The brokerage cited improved asset quality, reduced slippage, and a positive outlook as b reasons for its recommendation.
Canara Bank: On September 16th, amidst a rising stock market, Canara Bank's share closed at ₹113 with a slight gain. The brokerage firm Motilal Oswal has reiterated its BUY rating on the bank's stock, setting a target price of ₹135. This valuation is based on the bank's improved asset quality, declining slippage, and b fundamentals. Furthermore, its subsidiary, Canara HSBC Life Insurance, is preparing for its IPO, which is expected to provide an additional boost to the bank's growth.
Brokerage Target Price
Motilal Oswal has issued a BUY rating for Canara Bank and set a target price of ₹135. The stock closed at ₹113 on Tuesday. This implies a potential upside of approximately 20% from the current levels. In the past week alone, the stock has risen by about 5%.
On Tuesday, Canara Bank's stock opened at ₹113.65, reaching an intraday high of ₹113.85 and a low of ₹112.50 during trading. It is currently trading approximately 5% below its 52-week high of ₹119.30. The bank's market capitalization on the BSE exceeded ₹1.02 lakh crore.
Canara Bank's Subsidiary IPO
The brokerage firm stated that Canara HSBC Life Insurance Company, a subsidiary of Canara Bank, has received approval from SEBI for its DRHP (Draft Red Herring Prospectus). Following this, the company has now been permitted to file an updated RHP (Red Herring Prospectus) for its upcoming IPO. This move could unlock additional value for the bank and further strengthen investor confidence.
The bank's asset quality is continuously improving, and the slippage, or the rate of default on outstanding loans, is also decreasing. This is having a direct positive impact on the bank's cost of borrowing, which is now remaining within a manageable range. This improvement is a significant relief for the bank, as it strengthens its balance sheet and enhances investor trust.
Improvement in Net Interest Margin Expected
The brokerage anticipates that the bank's Net Interest Margin (NIM) could gradually increase to reach between 2.75% and 2.8%. The primary drivers for this improvement will be a reduction in the cost of funds and a more favorable outlook from the second half of FY2026 onwards. The bank's loan growth remains stable, with particularly b demand observed in the retail segment.
Bank's Performance
Motilal Oswal projects that Canara Bank will generate a Return on Assets (ROA) of 1.1% and a Return on Equity (ROE) of 19% by FY2027. These projections are based on the bank's current strength and improving fundamentals.
Market experts believe that the improving performance of public sector banks, coupled with Canara Bank's b growth trajectory and the upcoming IPO of its subsidiary, could prove to be a game-changer for this stock.
