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Canara Bank Ltd shares fell as much as 2.9 per cent to Rs 254.25. The state-run lender had on Wednesday posted a 15.1 per cent rise in Q2 net profit on a tax write-back and marginal improvement in asset quality.
The bank would have reported a loss without the tax gain. Provisions for the quarter surged 31.5 per cent to Rs 2,835 crore, as the lender set aside more funds for bad loans.
Canara Bank's Q2 “was good on pre-provision operating profit (PPoP) growth and asset quality trends. Still, we see better risk-reward at large peer corporate lenders given better starting points on PPoP margins, growth and capital,” Morgan Stanley says in a note.
While the bank's non-performing loans appear to have peaked, low coverage will keep credit costs elevated, and a low CASA will be a headwind for net interest margins as interest rates rise, says Deutsche Bank.
Canara Bank stock had fallen 27.3 per cent this year as of last close.
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