Canara Bank Disappointing Q3FY13 Numbers
DSIJ Intelligence / 08 Feb 2013
Canara Bank today came out with its Q3FY13 results which disappointed the streets. The company posted a muted business growth, seeing a decline in its Net Profit and continued facing headwinds on the asset quality front.
Canara Bank today came out with its Q3FY13 results which disappointed the streets. The company posted a muted business growth, seeing a decline in its Net Profit and continued facing headwinds on the asset quality front. The stock was looking weaker and was trading down by 2.4% to Rs 449 per share. Following are some of the key financial parameters of the bank:
| Particulars (%) | Dec 2012 | Dec 2011 |
|---|---|---|
| Net Interest Income (NII) | 1988 | 1919 |
| Net Profit (Rs/Cr) | 710.51 | 875.56 |
| CAR (Basel II) | 12.64 | 13.22 |
| Provisions (Rs/Cr) | 625.9 | 484.48 |
| Gross NPAs | 2.77 | 1.81 |
| Net NPAs | 2.35 | 1.49 |
| Return On Assets | 0.82 | 1.02 |
Public sector banks are facing headwinds when it comes to asset quality and Canara bank is no exception to this. The Gross and Net NPA of the bank increased by 96 and 86 basis points to 2.77% and 2.35% respectively on a YoY basis. It further got worsened on a sequential basis increasing by 19 and 23 basis points respectively, which is very concerning.
As on December 31, 2012, the Capital Adequacy Ratio (CAR) as per Basel II norms of the bank stood at 12.64% against 13.22% in the similar quarter last year. Return on Assets of the bank too declined by 20 basis points to 0.82% on a YoY basis.
The bank also posted a muted business growth. As on December 31, 2012, the bank’s deposits grew marginally by 3.14% to Rs 323963 crore. The advances, on the other hand, remained unchanged at Rs 218242 crore against Rs 217637 crore in the similar period last year. This is well below the Reserve Bank of India (RBI) estimate of deposits and advances growth of 13% and 15% respectively for FY13.
On the segmental front, the Treasury segment of the bank performed extremely well as revenue and profit both grew at 37% each to Rs 2816 crore and Rs 306 crore respectively on a YoY basis. Retail banking faced headwinds as revenue from the same declined by 1% to Rs 2312 crore while Profit plunged down by 53% to Rs 306 crore on a YoY basis.
Overall, we believe that the bank disappointed the streets with its December quarter numbers. On the valuation front, the bank is currently available at a Price to book value of around 0.8x. With a muted business growth coupled with troubles in asset quality, there is a possibility that the stock may see a further downside in the near to medium term. We would advise our readers to stay away from the counter.
| Particulars | Revenue | Operating Profit | ||||
|---|---|---|---|---|---|---|
| Segment (Rs/Cr) | Dec -12 | Dec -11 | % Change | Dec -12 | Dec -11 | % Change |
| Treasury Operations | 2815.78 | 2052.77 | 37.17 | 306 | 222.3 | 37.65 |
| Retail Banking | 2312.87 | 2335.25 | -0.96 | 306.35 | 650.96 | -52.94 |
| Wholesale Banking | 4173.7 | 4157.28 | 0.39 | 826.99 | 614.98 | 34.47 |
| Total | 9390.29 | 8574.45 | 9.51 | 1439.34 | 1488.24 | -3.29 |
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