NOTE FOR INVESTMENT OPERATION COMMITTEE

MD & CEO CFO CRO CIO

APPROVAL NOTE FOR PURCHASE OF EQUITY SHARE: - CANARA BANK

APPROVAL NOTE FOR UNAPPROVED INVESTMENT.

About Company: - Canara Bank is one of the larger PSBs by assets and has a pan-India presence, with a
network of 10,491 branches as on December 31, 2020. Besides banking, it undertakes factoring, asset
management, insurance, and retail and institutional broking services through its subsidiaries and
associates. The bank has loan book of Rs. 6,44,826Cr.

Investment Rational: -

 PSU banks including canara bank may play the recovery theme. Currently the Gross NPA stands
at 9% with Net NPA 3.9 and PCR at 80%. PCR of the bank is improving and we may see further
decrease in the NPA ratio.
 Valuation differential is attractive enough and potential upside of higher growth prospects over
the near-to-medium term.
 Having raised Rs20 bn equity (~40 bps capital accretion) , growth in loan book can be seen in
next few quarters.

Sector Outlook: - Asset Quality may deteriorate after second wave of covid-19 however provisions are
adequately done, Despite subdued credit growth, banks reported stable- to better margin trajectory,
mainly due to low CoF. Fee income partly revived, while healthy treasury gains and contained opex led
to healthy PPoP. Overall provisioning cost was moderate, leading to far better than-expected
profitability across banks. Delinquencies set to rise, but stress formation could be moderate vs. earlier
expectation, given better collection trend.

Valuation: - The stock is currently trading at 0.6X its FY23 book value. We assign 0.8x multiple to FY23
book value to arrive at TP of Rs165.

Recommendation: Based on above positive outlook, we recommend adding to our portfolio. The stock
will be considered under unapproved investment category.

Submitted for your approval, please.

Research Analyst Equity Dealer

Research Analyst
26th April 2021