Canara Bank Fundamental Analysis: The Complete Guide

Introduction:

The Public Sector Undertaking (PSU) bank sector is a key part of India’s banking system, comprising banks where the government holds a majority stake. This ownership ensures that these banks operate in the public interest. The growth of PSU banks aligns closely with national economic policies and efforts toward financial inclusion. The ongoing reforms and the government’s push for digital banking in 2024 have positioned PSU banks to adopt new technologies that enhance their services and operational efficiency. This growth is reflected in the NIFTY PSU Bank index, highlighting the sector’s positive trajectory.

Source: NSE

To make the best out of this growth, you can either invest in the index itself or a PSB like the Canara Bank. But before deciding on the investment, let’s take a look at the Canara Bank stock rate and use fundamental analysis to evaluate the Canara Bank stock price. 

Canara Bank Overview:

Canara Bank, known for its customer-centric approach, was established in July 1906 in Mangalore, Karnataka. Over its more than a century-long journey, the bank has experienced significant growth, especially after nationalization in 1969, which propelled it into a national player with extensive geographical reach and diverse clientele. The 1980s marked a period of business diversification for the bank. In June 2006, Canara Bank celebrated a century of operations in the Indian banking sector and later merged with Syndicate Bank in April 2020.

Today, Canara Bank is a major financial conglomerate with thirteen subsidiaries and sponsored institutions. It serves over 11.42 crore customers through a vast network of 9,627 branches and 12,256 ATMs across India. As of June 2023, it holds a market share of 6.2% in net advances and 6.5% in total deposits. The bank excels not only in commercial banking but also in corporate social responsibility. It focuses on national priorities, promotes rural development, and enhances self-employment through training institutes while advancing financial inclusion.

Canara Bank has consistently maintained a balanced asset mix, emphasizing sectors like agriculture and Micro, Small, and Medium Enterprises (MSMEs) alongside retail assets such as housing, education, and vehicle loans. As of March 2024, the bank’s capital adequacy ratio stood at 16.28%, well above the regulatory requirement of 11.5%. In FY 2023-24, it raised infrastructure bonds to diversify funding sources, totaling Rs.10,000 crore at competitive rates.

Shareholding Pattern:

The shareholding pattern of Canara Bank as of the quarter ending September 2024 is as follows-

Source: Company Report

Key Management Personnel:

Canara Bank was started by Shri Ammembal Subba Rao Pai in 1906. As of the financial year ending March 2024, the bank operates under the leadership of the following key management personnel:

1. Shri Vijay Srirangan (Non-Executive Chairman):

Shri Vijay Srirangan, a Gold Medalist from IIM Ahmedabad (PGDBM) and IIT Delhi (B.Tech), brings extensive experience to his role since November 2022. He was the Director General and Mentor at the Bombay Chamber of Commerce & Industry. Previously, he spent 36 years with Tata Group, serving in leadership roles at Tata Consultancy Services, Tata Infotech, Tata Unisys, and Tata Burroughs. His responsibilities ranged from training and research to international sales and systems integration.

2. Shri K Satyanarayana Raju (MD and CEO):

Shri K. Satyanarayana Raju, a Physics graduate with a postgraduate degree in Business Administration (Banking and Finance), began his banking career in 1988 at Vijaya Bank. He rose to Chief General Manager at Bank of Baroda, leading branches and serving as Zonal Head of Mumbai. He also held key roles in operations and services at the head office and was on the board of BoB Financial Solutions Limited. Currently, as Executive Director of Canara Bank since March 2021, he oversees various functions, including IT, digital banking, MSME, and corporate credit. 

3. Dr. Parshant Kumar Goyal (Director representing the Government of India):

Dr. Parshant Kumar Goyal, IAS, serves as Joint Secretary in the Department of Financial Services, Ministry of Finance, focusing on Financial Inclusion and Digital Payments. Earlier, as director of the same department, he handled agriculture credit and regional rural banks. He has also served as Secretary to the Chief Minister of Tripura, managing additional portfolios in the GA (C&C) and Industries & Commerce departments.

Canara Bank Financials:

1. Operating Profit:

Operating profit reflects the income generated from its core activities like lending, deposits, and other financial services, minus the operating expenses such as salaries, rent, and administrative costs. As of the financial year 2023-24, the operating profit for Canara Bank was Rs.29413 crore. The trend of operating income over the last few years is as under-

Source: Annual Report

2. Net Profit:

One of the primary measures of profitability, the net profit, for Canara Bank has been increasing since the bank incurred losses in 2019-20. As of the financial year 2023-24, the net profit of the bank was Rs.14554 crore. The trend of net profit over the last few years is as under-

Source: Annual Report

3. Net Interest Income:

Net Interest Income represents the bank’s profitability earned through its core activities. As of the financial year ending March 2024, the bank’s net interest income stands at Rs.36566 crore, which was 16.32% more than the NII of FY2023 (Rs.31435 crore). The trend for the NII of the bank over the last few years is as under-

Source: Annual Report

4. Deposits:

Deposits are a major source of funding for a bank, representing the money customers leave in savings, checking, or fixed accounts. For a bank, a growing deposit base means it has a larger base for lending, and its ability to generate income is good. A stable deposit trend indicates consistency and a lower base could signal a doubt in the bank’s ability to lend and earn. As of the financial year 2023-24, Canara Bank received a total deposit of Rs.22,72,968 crore, of which the CASA deposits were Rs.392327 crore, 7.06%. The trend for deposits received by Canara Bank over the last few years is as under-

Source: Annual Report

5. Advances:

Advances refer to the loans and credits extended by a bank to its customers. Interpreting a bank’s advances reveals the bank’s risk exposure and profitability. Higher advances indicate active lending and is considered positive when driven by a healthy demand and good credit quality. However, this needs to be examined in combination with risk management and the bank’s NPA. As of FY2024, Canara Bank’s advances stood at Rs.960602 crore. The trend for advances as per the bank’s loan book over the last few years is as under-

Source: Annual Report

Key Financial Ratios for Canara Bank:

• Capital Adequacy Ratio: The bank’s capital adequacy ratio is 16.28%. This means that for every Rs.100 of risk-weighted assets, the bank has Rs.16.28 in capital. The ratio highlights the bank’s healthy cushioning for organic growth in the forthcoming quarters and the bank’s ability to absorb potential losses.
• Net NPA Ratio: The net NPA ratio is 1.27%, meaning that out of every Rs.100 lent, Rs.1.27 is classified as non-performing. A lower NPA ratio shows effective credit management and a lower risk of bad loans.
• Return on Equity: The return on equity is 22.06%. This indicates that for every Rs.100 of equity invested by shareholders, the bank generated Rs.22.06 in profit, reflecting strong profitability.
• Return on Average Assets: The bank’s RoAA is 1.01%. This means that for every Rs.100 of assets, the bank earned Rs.1.01 in profit. A higher ROAA shows better asset utilization.
• Net Interest Margin: The net interest margin is 3.05%, meaning that for every Rs.100 of interest-earning assets, the bank earns Rs.3.05 in net interest income. A higher NIM shows the bank’s efficiency in earning from its lending activities.
• CASA Ratio: The CASA ratio for Canara Bank is 32.29%. This means that 32.29% of the bank’s total deposits come from low-cost current and savings accounts, reflecting a stable and cost-effective source of funding for the bank.

Source: Annual Report

Canara Bank Share Price Analysis:

A registered investment advisor evaluates a company share using analysis techniques and a stock screener. Canara Bank was listed on the NSE in December 2002. Since then, the stock has generated gains of over 900%. As of 24th October 2024, the market cap of Canara Bank stands at Rs.89,101.01 crore, and its share price stands at Rs.98.22, more than the Bank of Maharashtra share price (Rs.50). 

Source: MoneyControl

Over the last twelve months, the stock has grown 38.07% as of 24th October 2024. It has surpassed the growth levels of the major indices NIFTY50 (26.42%) and SENSEX (23.92%). 

FY2024 Performance Highlights of Canara Bank:

• The bank’s global business grew by 11.31% in FY 2023-24, reaching Rs.22,72,968 crores, with global deposits increasing by 11.29%.
• Its retail portfolio saw an 11.68% growth, reaching Rs.1,56,414 crores. Housing loans rose by 10.81% to Rs.93,482 crores, vehicle loans by 14.03% to Rs.17,251 crores, and education loans grew by 6.65% to Rs.15,726 crores.
• Advances to agriculture and allied activities increased by 18.69%, reaching Rs.2,53,206 crores, while advances to the MSME segment grew by 6.67% to Rs.1,31,869 crores by March 2024.
• The bank’s yield on advances rose by 101 basis points, from 7.70% in March 2023 to 8.71% in March 2024.
• In January 2024, Canara Bank inaugurated its Data and Analytics Center (DnA) in Bengaluru, setting a benchmark in the Indian banking sector.
• The bank introduced API Banking to provide seamless digital banking services for corporate customers.
• Canara SHG E-money, a unique digital initiative in partnership with the Reserve Bank Innovation Hub, now offers doorstep digital services to Self-Help Groups (SHGs).
• The bank has partnered with NEC Corporation and HPE for Data Lake House implementation and with Microsoft for establishing an Advanced Analytics Platform and Data Lake in the cloud.

Source: Annual Report

Bottomline:

In FY2024, Canara Bank introduced API banking for corporate customers and launched Canara SHG E-money with the Reserve Bank Innovation Hub. Embracing digital transformation, it uses advanced analytics and cloud-based solutions to enhance customer service. The bank aims to increase low-cost deposits by offering innovative, customized products, striving to be recognized as the “Best Bank to Bank With.” Investing in Canara Bank could be a way to participate in the growth of India’s banking sector. However, when deciding whether to invest in Canara Bank or another option, remember to consider fundamental analysis vs. technical analysis. Use a stock screener to compare your investment choices with your financial goals. If necessary, consult a registered advisor for guidance.

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