Equirus Securities has issued a buy rating on Canara Bank with a target price of ₹155 in its research report dated July 28, 2026. The bank is currently trading at ₹124.30, representing a potential upside of approximately ₹30.70. The brokerage maintains its Long position on the stock, citing the bank's improving operational metrics and growth prospects in the current market environment.
Canara Bank delivered a steady quarter with core revenue performance meeting expectations. Advances grew 5% quarter-on-quarter, aided by healthy retail growth of 36% year-on-year and 7% quarter-on-quarter, while MSME advances grew 15% year-on-year and 7% quarter-on-quarter. Corporate advances also contributed with 4% quarter-on-quarter growth. The bank's net slippage moderated to 58 basis points compared to 94 basis points in the previous quarter, while GNPA/NNPA ratios improved to 1.6%/0.4% from 1.8%/0.4% quarter-on-quarter.
The bank reported flattish NIMs at 2.52%, which remains at the lower end of the SOE bank NIM range. The 22 basis points quarter-on-quarter cost of funds benefit was largely passed on to borrowers, resulting in a 29 basis points quarter-on-quarter decline in yield on advances. Management currently sees 20-30 basis points cost of funds benefits on incremental deposits, supporting NIMs in Q2FY27. The bank has guided to FY27 NIMs of 2.5-2.6% and intends to improve the CASA ratio to drive medium-term margin expansion.
The bank continues to replace bulk deposits with retail CASA and term deposits, supporting its liability franchise improvement. Canara Bank has mobilised US$ 775 million of FCNR(B) deposits and targets total mobilisation of US$ 2.5 billion. This strategic shift towards retail deposits is expected to provide 20-30 basis points cost of funds benefits on incremental deposits, supporting margin recovery in the medium term.
Equirus Securities expects FY27E RoA of about 1%, supported by healthy PSLC fee income and sustained recoveries. The brokerage maintains its multiple of 1.0x on March 2028 adjusted book value and keeps the target price at ₹155. The upgrade to 'BUY' reflects the bank's improving operational metrics and growth prospects, with sustained improvement in the liability franchise and NIM expansion being key catalysts for earnings upgrades and valuation re-rating. However, near-term NIMs are likely to remain constrained, with the bank building in flattish margins in its projections.
