Canara Bank hits over 2-year high; stock zooms 62% from QIP price

Shares of Canara Bank hit an over two-year high of Rs 242.60 after they rallied 6 per cent on the BSE in Monday’s intra-day trade after rating agency ICRA upgraded the rating of Bank’s Basel III Tier II Bonds to “ICRA AAA (Stable)” from “ICRA AA+(hyb) (Stable)”. The rating agency has also upgraded its ratings on the Basel III Additional Tier I Bonds to “ICRA AA+ (Stable)” from “ICRA AA (hyb) (Stable)”.

The stock of the public sector bank was trading at its highest level since July 2019. In the past one month, Canara Bank has outperformed the market by surging 37 per cent, as compared to less than 1 per cent rise in the S&P BSE Sensex. It has zoomed 62 per cent against qualified institutional placement (QIP) price of Rs 149.35 per share.

In August, Canara Bank had raised Rs 2,500 crore through QIP by issuing 167.39 million equity shares to qualified institutional buyers (QIB). The Bank had said it intended to utilize the net proceeds towards augmenting the Bank’s Tier I capital to support growth plans and to enhance the business of the Bank.

Ace investor Rakesh Radheshyam Jhunjhunwala held 29.10 million equity shares, or 1.6 per cent stake, in Canara Bank as on September 30, 2021, according to the shareholding pattern data filed by the Bank.

ICRA in rating rational said the rating upgrade factors in the improvement in the solvency profile1 of Canara Bank which is expected to sustain going forward. An improved capital position has supported the bank’s solvency profile, which is expected to get a further boost from improving profitability metrics and expectations of steady internal capital accruals.

“Though the slippages could remain high in FY2022 due to declining provisions for legacy stressed assets, ICRA expects the credit provisions to moderate as the bank is likely to significantly absorb the credit provisions from its operating profits. As a result, the bank’s profitability is expected to improve with a return on assets (RoA) of over 0.2-0.3 per cent in FY2022 and over 0.3-0.5 per cent in FY2023,” it said.

The Stable outlook on the ratings factor in the expectations of an improving solvency profile, internal capital generation and the strong liability profile of the bank, apart from its sovereign ownership, ICRA said. CLICK HERE FOR FULL DETAILS

Meanwhile, earlier on October 6, 2021, Moody’s Investors Service (Moody’s) had affirmed the ‘Ba1’ long-term local and foreign currency deposit ratings of four state-owned banks including Canara Bank, as well as their ‘b1’ BCAs. Their rating outlook has been changed to stable from negative.

“The affirmation of ratings and BCAs, and change in outlook to stable from negative, reflect the fact that despite the significant economic challenges since the onset of the pandemic, their asset quality has only deteriorated modestly while capital has improved,” Moody’s had said.

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