Canara Bank Result Updated
Canara Bank Result Updated
Canara Bank Result Updated
Canara Bank
Performance Highlights
Particulars (` cr) NII Pre-prov. profit PAT 4QFY12 2,040 1,491 829 3QFY12 1,919 1,577 876 % chg (qoq) 6.3 (5.5) (5.3) 4QFY11 1,973 1,695 899 % chg (yoy) 3.4 (12.0) (7.8)
BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Banking 18,553 1.0 592/349 82,491 10 16,420 4,966 CNBK.BO CBK@IN
`419 `522
12 months
Canara Bank reported a weak set of numbers for 4QFY2012, with net profit declining by 7.8% yoy to `829cr. The companys bottom line was dented by subdued net interest income (in-line with our expectation), yoy decline in fee income (higher-than-expected) and higher operating expenses. We maintain our Buy recommendation on the stock. Business growth remains moderate; Slippages increase sequentially: The banks overall business growth remained moderate, with advances growth of 9.4% yoy, largely aided by agriculture, infrastructure and industrials segments. Deposits grew by 11.3% yoy. On the liabilities front, calculated CASA ratio declined by 393bp yoy to 24.3% due to a 39.5% yoy decline in current deposits despite moderate 10.5% growth in saving deposits. Reported NIM for the bank remained flat sequentially during 4QFY2012, as rise in yield on advances by 8bp qoq to 10.93% was completely offset by a similar rise in cost of deposits to 7.35%. Commission and brokerage income declined during the quarter by 13.7% yoy to `215cr. Gross and net NPA ratio for the bank remained at nearly the same levels on a qoq basis. Provision coverage ratio for the quarter also remained flat sequentially at 67.6%. During 4QFY2012, the bank restructured `4,504cr worth of accounts, of which `1,475cr were on account of restructuring of Air India. The outstanding restructured book as of 4QFY2012 stands at `7,986cr. The bank did not restructure any SEB accounts during 4QFY2012, but expects `5,385cr of SEB restructuring to occur in 1QFY2013, which would include discoms from Rajasthan, Haryana, U.P. and Gujarat. Outlook and valuation: Although a weakening domestic macro-economic environment and consequently slower credit growth and ailing asset quality are likely to cap near-term upsides, cyclically moderate valuations of 0.7x FY2014E ABV vs. five-year average of 1.0x and range of 0.7-1.4x in our view largely factor in the negatives. Hence, we recommend Buy on the stock with a target price of `522. Key financials
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%)
Source: Company, Angel Research
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 67.7 11.0 14.6 6.7
3m (7.5) (20.4)
FY2011 7,823 37.7 4,026 33.2 2.7 90.9 4.6 1.0 1.3 26.4
FY2012 7,689 (1.7) 3,283 (18.5) 2.2 74.1 5.7 0.9 0.9 17.0
FY2013E 8,848 15.1 3,680 12.1 2.3 83.1 5.0 0.8 0.9 16.7
FY2014E 10,267 16.0 4,106 11.6 2.3 92.7 4.5 0.7 0.9 16.4
Vaibhav Agrawal
022 3935 7800 Ext: 6808 [email protected] Varun Varma 022 3935 7800 Ext: 6847 [email protected] Sourabh Taparia 022 3935 7800 Ext: 6872 [email protected]
4QFY12 3QFY12 % chg (qoq) 4QFY11 % chg (yoy) 8,267 6,189 1,908 170 (0) 6,227 2,040 769 674 215 95 98 361 2,809 1,319 826 493 1,491 462 390 72 1,029 200 829 19.4 7,812 5,946 1,810 56 0 5,894 1,919 779 622 205 157 68 349 2,698 1,121 713 408 1,577 501 142 359 1,076 200 876 18.6 5.8 4.1 5.4 201.5 (107.1) 5.7 6.3 (1.3) 8.4 4.9 (39.5) 44.1 3.5 4.1 17.7 15.9 20.7 (5.5) (7.9) 174.6 (80.1) (4.3) (5.3) 84bp 6,418 4,823 1,521 73 1 4,445 1,973 933 951 249 (18) 327 375 2,906 1,211 783 428 1,695 546 541 5 1,149 250 899 21.8 28.8 28.3 25.4 132.7 (103.4) 40.1 3.4 (17.5) (29.1) (13.7) NA (70.0) (3.6) (3.3) 8.9 5.6 15.0 (12.0) (15.5) (27.9) 1,340.8 (10.4) (20.0) (7.8) (233)bp
Actual 2,040 769 2,809 1,319 1,491 462 1,029 200 829
Estimates 2,019 861 2,880 1,196 1,685 391 1,293 313 981
Var (%) 1.0 (10.6) (2.5) 10.3 (11.5) 18.0 (20.4) (36.1) (15.4)
4QFY12 232,490 327,054 71.1 14,819 64,792 79,611 24.3 13.8 10.4 7.4 10.9 8.0 9.0 6.7 2.5 46.9 4,032 1.7 3,386 1.5 67.6 2.1 0.4
3QFY12 219,253 315,456 69.5 12,059 63,361 75,420 23.9 13.2 9.5 7.3 10.9 7.9 8.8 6.6 2.5 41.6 3,999 1.8 3,265 1.5 67.9 1.6 0.2
%chg (qoq) 6.0 3.7 158bp 22.9 2.3 5.6 43bp 54bp 87bp 8bp 8bp 3bp 16bp 13bp (2)bp 539bp 0.8 (8)bp 3.7 (3)bp (27)bp 49bp 27bp
4QFY11 212,467 293,973 72.3 24,500 58,617 83,117 28.3 15.4 10.9 5.8 9.7 7.7 8.1 5.4 3.1 41.7 3,089 1.5 2,347 1.1 73.0 4.4 0.7
%chg (yoy) 9.4 11.3 (119)bp (39.5) 10.5 (4.2) (393)bp (162)bp (52)bp 155bp 120bp 24bp 82bp 135bp (62)bp 527bp 30.5 28bp 44.3 35bp (540)bp (224)bp (26)bp
25.5 25.3
23.7 25.7
23.8 25.4
15.5 19.7
9.4 11.3
28.3
25.4
25.8
23.9
68.0
20.0
The banks reported NIM remained flat sequentially during 4QFY2012, as the 8bp qoq rise in yield on advances to 10.93% was completely offset by a similar rise in cost of deposits to 7.35%. Management attributed the declining trend in CASA ratio mostly to the flight of saving deposits to higher yielding term deposits and difficulty in sustaining the current account balances due to prevalent domestic macro headwinds.
Fee income declines on a yoy basis on account of a dip in commission and brokerage income
Commission and brokerage income declined during the quarter by 13.7% yoy to `215cr. Recoveries from written-off accounts, which halved sequentially in the last quarter to `68cr, picked up momentum once again as they grew by 44.1% sequentially. Treasury income posted a healthy performance growing to `95cr in 4QFY2012 from loss of `18cr in 4QFY2011. Overall, core fee income declined by 29.1% yoy to `674cr.
24.3
7.0
22.5
(1.4)
4.4
2.6
2.3
1.6
2.1
1.5 1.1
1.7 1.3
1.7 1.4
1.8 1.5
1.7 1.5
60.0
1.0
41.7
45.2
42.5
41.6
46.9
40.0
0.5 -
Investment concerns
Weak liability franchise likely to keep NIM under pressure
The bank has a relatively weak liability profile with a calculated CASA base at 24.3% as of 4QFY2012. As witnessed in 3QFY2012, overall CASA deposits again declined by 4.2% yoy in 4QFY2012 as compared to 21.8% yoy growth witnessed in 4QFY2011. The bank had relatively high proportion of more costly bulk deposits and CDs at ~43% of deposits in 4QFY2012 as against ~30% in 3QFY2012, which increases the banks exposure to interest rate movements. Due to tight liquidity situation prevalent in 4QFY2012, margins continued to remain under check. Accordingly, we keep our NIM forecast for FY2013 at 2.2%.
Earlier estimates FY2013 17.0 16.0 25.4 2.2 11.2 15.0 15.0 1.8 69.0 FY2014 18.0 18.0 24.6 2.2 14.3 15.0 15.0 1.7 70.0
Revised estimates FY2013 18.0 13.0 24.3 2.3 9.8 15.0 15.0 1.6 67.6 FY2014 18.0 18.0 23.7 2.3 13.2 15.0 15.0 1.5 68.0
FY2014 Earlier estimates 10,204 3,805 14,009 6,018 7,990 1,736 6,254 2,029 4,225 Revised Var. (%) estimates 10,267 3,639 13,906 6,181 7,725 1,647 6,078 1,972 4,106 0.6 (4.4) (0.7) 2.7 (3.3) (5.2) (2.8) (2.8) (2.8)
Earlier estimates 8,791 3,329 12,120 5,233 6,887 1,463 5,424 1,627 3,797
Revised Var. (%) estimates 8,848 3,213 12,061 5,375 6,686 1,428 5,258 1,577 3,680 0.6 (3.5) (0.5) 2.7 (2.9) (2.4) (3.1) (3.1) (3.1)
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF
Income statement
Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY09 4,718 33.4 2,427 5.1 7,145 22.2 3,065 9.8 4,080 33.5 1,507 31.1 2,572 35.0 500 19.4 2,072 32.4 FY10 5,681 20.4 2,858 17.7 8,538 19.5 3,478 13.5 5,061 24.1 1,239 (17.8) 3,821 48.6 800 20.9 3,021 45.8 FY11 7,823 37.7 2,703 (5.4) 10,526 23.3 4,419 27.1 6,107 20.7 1,081 (12.8) 5,026 31.5 1,000 19.9 4,026 33.2 FY12 7,689 (1.7) 2,928 8.3 10,617 0.9 4,674 5.8 5,943 (2.7) 1,860 72.1 4,083 (18.8) 800 19.6 3,283 (18.5) FY13E 8,848 15.1 3,213 9.8 12,061 13.6 5,375 15.0 6,686 12.5 1,428 (23.2) 5,258 28.8 1,577 30.0 3,680 12.1 FY14E 10,267 16.0 3,639 13.2 13,906 15.3 6,181 15.0 7,725 15.5 1,647 15.3 6,078 15.6 1,972 32.4 4,106 11.6
Balance sheet
Y/E March (` cr) Share Capital Reserve & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY09 410 11,798 186,893 21.3 7,057 6,944 6,498 219,599 10,037 6,623 57,777 138,219 28.9 2,929 4,014 219,599 21.7 FY10 410 14,262 234,651 25.6 1,041 7,399 6,977 264,741 15,719 3,934 69,677 169,335 22.5 2,859 3,217 264,741 20.6 FY11 443 19,597 293,973 25.3 5,198 9,063 7,805 336,079 22,015 8,693 83,700 212,467 25.5 2,844 6,359 336,079 26.9 FY12 443 22,247 327,054 11.3 5,787 9,738 8,891 374,160 17,795 10,384 102,057 232,490 9.4 2,858 8,576 374,160 11.3 FY13E 443 25,129 369,571 13.0 6,540 11,491 9,627 422,801 14,783 11,734 109,123 274,338 18.0 3,132 9,691 422,801 13.0 FY14E 443 28,334 436,093 18.0 7,695 13,559 11,358 497,482 17,444 13,807 127,535 323,719 18.0 3,575 11,403 497,482 17.7
Ratio analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 2.4 0.8 1.6 0.3 1.9 0.9 2.8 1.5 1.3 0.3 1.0 21.8 22.6 2.3 0.5 1.8 0.4 2.2 0.8 3.0 1.4 1.6 0.3 1.2 21.5 26.8 2.6 0.4 2.2 0.1 2.3 0.8 3.1 1.5 1.7 0.3 1.3 19.7 26.4 2.2 0.5 1.6 0.1 1.7 0.7 2.5 1.3 1.1 0.2 0.9 18.4 17.0 2.2 0.4 1.9 0.1 1.9 0.8 2.7 1.3 1.3 0.4 0.9 18.1 16.7 2.2 0.4 1.9 0.0 1.9 0.8 2.7 1.3 1.3 0.4 0.9 18.3 16.4 8.3 1.9 1.9 5.7 1.4 2.4 4.6 1.0 2.6 5.7 0.9 2.6 5.0 0.8 3.7 4.5 0.7 4.2 50.5 221.3 8.0 73.7 305.8 10.0 90.9 401.1 11.0 74.1 447.3 11.0 83.1 509.6 15.5 92.7 580.1 17.5 1.6 1.1 2.2 0.5 30.5 1.5 1.1 2.4 0.6 77.7 1.4 0.8 2.1 0.3 73.0 1.7 1.5 2.1 0.4 67.6 2.2 1.4 1.6 0.3 67.6 2.5 1.4 1.5 0.3 68.0 30.1 74.0 14.1 8.0 29.1 72.2 13.4 8.5 28.3 72.3 15.4 10.9 24.3 71.1 15.6 11.2 24.3 74.2 16.0 11.2 23.7 74.2 15.7 10.7 2.4 42.9 1.0 22.6 2.4 40.7 1.2 26.8 2.7 42.0 1.3 26.4 2.2 44.0 0.9 17.0 2.3 44.6 0.9 16.7 2.3 44.4 0.9 16.4 FY09 FY10 FY11 FY12 FY13E FY14E
10
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Canara Bank No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
11