The ratings assigned to the bond issue of Canara Bank (CB) derives strength from majority ownership by Government of India (GoI) from which it has been receiving timely capital infusion, experienced management and governance, established retail franchise with strong network in southern states of India, comfortable capitalization levels with total CAR well above regulatory requirements post equity infusion during H1FY20, moderate resource profile with relatively low CASA share but high retail deposit and comfortable liquidity profile.
These rating strengths are partially offset by moderate asset quality of the Bank with high NNPA resulting in relatively higher NNPA to net-worth compared to its peers though improving, continued slippages resulting in higher provisioning impacting profitability of the bank and modest provision coverage (including technical write-offs). Bank’s profitability parameters have witnessed improvement during 9MF20 with improvement in recoveries.
The rating is placed under watch with developing implications on account of ongoing amalgamation process of Syndicate Bank into Canara Bank following directive from Ministry of Finance, GOI. The amalgamated bank is likely to be the 4th largest PSB post amalgamation.
The ratings agency said that it will continue to monitor the development including challenges in successful integration and take appropriate rating call once clarity emerges on the merged entity’s financial and business risk profile. The announcement was made after market hours on Tuesday.
Shares of Canara Bank was down 1.27% at Rs 139.90. It has fallen 24.70% in the past one month and 37.53% in the past three months.
Canara Bank’s net profit rose 3.81% to Rs 329.62 crore on 3.61% rise in total income to Rs 14,001.63 crore in Q3 December 2019 over Q3 December 2018.
Canara Bank is a state-owned commercial bank with headquarters in Bangalore. The Government of India holds a 78.52% stake in Canara Bank as of December 2019.
