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Dolat Capital Report
Canara Bank reported net interest income and pre-provision operating profit (PPoP) growth of 21% and 32% YoY respectively on an amalgamated basis, driven by muted slippages, higher treasury gains and sharp decline in cost of funds.
Moratorium levels stood at 22% in June against 17% in May for standalone Canara Bank. The amalgamation resulted in sharp erosion in net worth with Common Equity Tier (CET1) ratio declining by 330 basis points QoQ to 6.2% for Syndicate Bank and 8.4% for the merged entity as of April 1, 2020.
Core equity ratio further declined to 8.15% in Q1 FY21 for the amalgamated entity.
We remain concerned over immediate challenges on capital and integration front, apart from asset quality worries. Moreover, weak operating metrics (PPoP/assets at 1.4%) and low provision buffers (0.2% of advances) provided little comfort.
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