What the bad jobs report means for markets
On Tuesday, BofA Securities adjusted its outlook on Canara Bank (NSE:CNBK) (CBK:IN), reducing the price target from INR135.00 to INR125.00, while still recommending the stock as a Buy. The reevaluation followed Canara Bank's third-quarter earnings report for fiscal year 2025, which showed a profit after tax (PAT) of Rs41 billion. This figure represents a 2% increase from the previous quarter and a 12% rise year-over-year, but it fell short of expectations due to a combination of factors highlighted by BofA Securities.
The bank's earnings were impacted by higher recoveries and treasury gains, which helped mitigate the effects of a net interest margin (NIM) contraction of 15 basis points quarter-over-quarter. The NIM contraction was primarily due to rising interbank yields. Despite this, Canara Bank managed to keep operating expenses under control with a modest 3% year-over-year increase and maintained stable credit costs at 93 basis points.
Canara Bank experienced robust loan growth at 3.7% quarter-over-quarter and 10% year-over-year. However, deposit growth did not keep pace, recording a 1.6% increase quarter-over-quarter and 8% year-over-year. The slower deposit growth was partly attributed to the bank's strategic decision to explore alternative funding options.
Asset quality at Canara Bank remained steady, with slippages falling below the 1% threshold and the net non-performing assets (NPA) ratio reaching a record low of 0.89%. The bank's CEO expressed confidence in maintaining a recovery run rate of Rs2,000 crores for the upcoming quarters, supported by a technical write-off pool that has reached Rs68,000 crores.
The financial institution's performance reflects a balance between growth and stability, as it navigates a challenging interest rate environment and continues to focus on recovery and operational efficiency. Canara Bank's commitment to maintaining a healthy asset quality and its proactive approach to managing funding sources are key elements that underpin BofA Securities' continued positive stance on the bank's stock, despite the revised price target.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.