Canara Bank Q4 Result: Valuable Performance On A Contracting Net Profit

Canara Bank, a mid-sized public sector bank, came out with stellar numbers for its fourth quarter of FY14. The number posted by the bank clearly beats the estimates at which market were betting on. Although net profit of the bank dropped by 15.8% on yearly basis to Rs 610.83 crore for Q4FY14, it was way below the street estimates of a drop of almost one third or around Rs 500 crore. 

Rise in Net Interest Income (NII) that is difference between interest earned and interest expended helped the bank to beat the street estimates in profit numbers. NII for the bank increased by 21.3% on yearly basis to Rs 2535.19 crore for Q4FY14 against the market expectation of around Rs 2350 crore. Good amount of cash recovery and up-gradation of accounts helped bank to beat the street estimates. Other income of the bank increased by 6.3% on yearly basis and stood at Rs 1070 crore for Q4FY14 while on quarterly basis it increased by 26%. Core fee income saw a healthy growth of 32% on sequential basis.

What led to drop in the profit of the bank was rise in the other expenses and Provisions & contingencies. Other expenses of the bank have increased by huge 45.6% to Rs 743.9 crore for Q4FY14, whereas provision & contingencies too increased by 45% to Rs 1091.27 crore in the same period. 

Asset quality of the bank has seen marked improvement during the quarter ended March 2014 on sequential basis. In absolute terms, the gross Non-Performing Assets (NPAs) and net NPA of the bank has dropped by 6% and 13% respectively. As percentage of gross advances and net advances, gross NPA and net NPA has declined on both yearly as well as on sequential basis. Gross NPA at the end of Q4FY14 stood at 2.49% of gross advances, whereas net NPA came at below 2% and stood at 1.98% of net advances. 

The board of directors of the bank have recommended a dividend of Rs 4.5 per share for FY14.

Following this stellar result, shares of Canara Bank shot up by Rs 18.55 to Rs 304.2 and closed 6.5% above its previous closing. Shares of the bank are still trading at attractive valuation of half of their book value and looking at the results of the bank it seems that the worst for the bank in terms of asset quality is over and long term investor can add the stock to their portfolio.