Keshav Seth 17 October 2026

Canara Bank Share Price Target at Rs 158: BOB Capital Markets Research

BOB Capital Markets has maintained its BUY rating on Canara Bank with a revised target price of Rs 150, down from Rs 158, implying about 20% upside from the Oct. 14 close of Rs 125. The brokerage values the lender at 0.9 times its estimated September 2028 adjusted book value. Net interest income rose 20.4% year on year to Rs 11,005 crore in the September quarter, while profit after tax climbed 8.4% to Rs 5,175 crore. Gross NPAs fell to 1.3% as recoveries outpaced fresh slippages for a second straight quarter. Management kept its FY27 margin guidance of 2.50% to 2.60%, though low-spread foreign currency deposits could pinch margins.

BUY MaintainedQ2FY27 Result ReviewPSU Banking

BOB Capital Markets · Oct. 15, 2026

Canara Bank: recoveries outrun slippages as the margin promise holds

BOBCAPS trims its target to Rs 150 but keeps the faith in a state-run lender delivering 20% loan growth, a 1.3% gross NPA ratio and a stock trading at under one times book.

Investor passbook

Account: Canara Bank (NSE) · Branch: BOBCAPS

Date	Particulars	Rs
Oct. 14	Opening balance (CMP)	125
—	Old target (reversed)	158
12 mo.	Expected credit	+25
Target	Closing balance (TP)	150

Interest earned: ~20% · 52-week range Rs 117–163

Parameter	Level
Rating	BUY (maintained)
Current market price (Oct. 14)	Rs 125
Target price	Rs 150 (from Rs 158)
Potential upside	~20%
52-week high / low	Rs 163 / Rs 117
Valuation basis	0.9x September 2028E adjusted book value
Market capitalisation	About Rs 1.13 lakh crore
Shareholding (promoter / FPI / DII)	63% / 14% / 11%

A quarter of brisk lending

Advances rose 20.4% year on year to Rs 13.61 lakh crore, led by retail loans, which surged 31.6%, followed by corporate credit at 17.3% and MSME lending at 15.5%. Retail, agriculture and MSME loans made up 59% of the book.

Gold loans reached Rs 2.82 lakh crore. A corporate pipeline of Rs 47,000 crore to Rs 50,000 crore in green energy, data centres and infrastructure supports the next leg.

Deposits grew 13.1% to Rs 16.97 lakh crore. Management guides for loan growth of 11% to 12% and deposit growth of 9% to 10% for FY27.

The foreign currency deposit trade

The bank raised foreign currency non-resident (FCNR) deposits to retire costlier bulk deposits and to lend directly. Bulk deposits and certificates of deposit stayed flat at about Rs 4.38 lakh crore.

FCNR flow board · Q2FY27

Raised

~Rs 51,600 cr

Lent out directly

~Rs 28,500 cr

Spread on lending

40–50 bps

CRR/SLR saving

22–23 bps

Dollar amounts converted by TopNews at about Rs 89 per US dollar.

The FCNR money lowered the cost of funds and earned reserve-requirement exemptions worth 22 to 23 basis points, but the loans it funded carry thin spreads. BOBCAPS expects that to weigh on margins next quarter. The overall CASA ratio also slipped to 26.4% from 28.5% a year earlier.

Margins edge up, costs ease

Loan yields rose 3 basis points sequentially to 8.30%, while the cost of funds inched up 1 basis point to 4.88%, lifting the net interest margin 3 basis points to 2.55%. With 53% of the loan book linked to the repo rate, the bank stands to gain from the recent 25-basis-point rate hike.

Net interest income rose 20.4% to Rs 11,005 crore, enough to absorb a sharp fall in treasury income. Trading gains shrank to Rs 153 crore from Rs 1,217 crore on elevated bond yields. Operating profit still grew 2.0% to Rs 8,758 crore. The cost-to-income ratio fell to 47.8% and provisions dropped 24.3%, lifting profit after tax 8.4% to Rs 5,175 crore.

Bad loans keep sliding

Recoveries exceeded fresh slippages of about Rs 1,800 crore, mostly from MSME and agriculture. The annualised slippage ratio of 0.6% sits well inside management's 0.8% guidance.

Gross NPA ratio, glide path (%)

Q2FY26

2.4

Q3FY26

2.1

Q4FY26

1.8

Q1FY27

1.6

Q2FY27

1.3

Net NPA fell to 0.3%; provision coverage rose to 77.9%. Bars scaled by TopNews from BOBCAPS's quarterly table.

The special-mention pipeline stands at 2.42% of loans. The catch, as BOBCAPS notes, is that the pool of technically written-off accounts, now about Rs 18,000 crore, is shrinking, so the recoveries that have flattered credit costs will not last indefinitely. Drought-hit exposure of about Rs 13,900 crore will be handled through restructuring.

Capital cushion for the ECL shift

Management now estimates the one-time expected-credit-loss requirement at Rs 12,000 crore to Rs 15,000 crore, up from Rs 10,000 crore to Rs 12,000 crore. That equals a 1.0% to 1.2% hit to capital.

Capital adequacy headroom (%)

Requirement 11.5

Buffer after ECL

CRAR 17.19% · CET1 12.80% · hatched slice = ECL impact of 1.0–1.2 points, leaving CRAR near 16% (TopNews arithmetic; scale 0–20%).

Management expects to absorb it within one to two years, well ahead of the RBI's five-year window.

Earnings outlook

Year to March	FY26A	FY27E	FY28E
Net interest income (Rs crore)	37,210	43,355	50,097
Adjusted net profit (Rs crore)	19,187	20,137	23,243
EPS (Rs)	21.2	22.2	25.6
Net interest margin (%)	2.5	2.6	2.7
Gross NPA (%)	1.8	1.6	1.4
RoE (%)	18.0	16.6	16.7
P/E (x)	5.9	5.6	4.9
P/BV (x)	1.0	0.9	0.8

BOBCAPS expects the bank to meet its FY27 guidance of a 2.5% to 2.6% margin, 0.75% credit cost, return on assets of 1.01% to 1.05% and return on equity of 16.5%.

Valuation cheque · BOBCAPS

Pay: Canara Bank shareholders Valid: 12 months

Amount: Rupees one hundred fifty only Rs 150

Memo: 0.9x September 2028E adjusted book value; earlier cheque for Rs 158 cancelled.

Downside risks flagged by BOBCAPS

Fading recoveries: A depleting written-off pool could shrink future recoveries in absolute terms.

Bond yields: Elevated yields could cause treasury losses that hit operating profit and earnings.

Drought relief: State relief measures could raise credit costs and weaken asset quality, which current valuations assume will stay strong.

Editor's note

Loan growth: Page one says advances grew 19.5%; the quarterly table shows 20.4%, which TopNews uses.

Credit cost: The summary cites 0.54%; the call highlights cite 0.47%, unreconciled.

Deposit growth: Sequential growth appears as 5.3% and 5.9%; the underlying figures give 5.3%.

CASA basis: The 29% quoted against management's 30% to 32% goal is domestic CASA; the overall ratio is 26.4%.

The investor takeaway

Canara Bank pairs rapid loan growth with cleaner books at under one times book value. The questions are how much FCNR-funded lending dilutes margins and how long recoveries last. BOBCAPS sees enough cushion to keep its BUY call, with a 12-month target of Rs 150.

Levels at a glance: BUY · CMP Rs 125 · Target Rs 150 · Upside ~20% · 52-week range Rs 117–163 · Valuation 0.9x Sept. 2028E ABV

Sources

BOB Capital Markets (BOBCAPS) result review on Canara Bank dated Oct. 15, 2026, by research associate Catherine Gomes; company data; NSE; Bloomberg. Rupee figures converted to crore and lakh crore by TopNews; market capitalisation estimated from the share count. Charts use the brokerage's figures.

Disclaimer: Investments in securities markets are subject to market risks. Read all related documents carefully before investing. The views and targets above belong to the research house and do not constitute investment advice from TopNews.

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