Canara Bank gains 2%; why PSB outperforms PSU Bank index on Monday?

Motilal Oswal Financial Services reiterated BUY rating on Canara Bank with a revised target price of ₹175 per share.

Canara Bank share price today

 

Share price of Canara Bank moved higher by 2.3 per cent to ₹145.04 on the National Stock Exchange (NSE) in Monday’s intra-day trade. The public sector bank (PSB) outperformed the Nifty PSU Bank index, which was up 0.58 per cent, while the benchmark index Nifty 50 was up 0.45 per cent at 12:36 PM.

 

However, in the past one month, Canara Bank has underperformed the market by falling 8 per cent, as against 2 per cent rise in the Nifty PSU Bank index and 0.42 gain in the Nifty 50. The stock price of Canara Bank had hit a 52-week high of ₹160.79 on January 29, 2026.  CATCH STOCK MARKET UPDATES TODAY LIVE

 

What’s driving Canara Bank on Monday?

 

Domestic rating agencies India Ratings & Research (Ind-Ra) and ICRA reaffirmed the credit rating of Canara Bank’s instruments with a stable outlook. The ratings consider the bank’s robust profitability and strong capitalisation profile with the same expected to remain healthy, going forward, the rating agencies said.

 

While net interest margins (NIMs) of banks had moderated in recent periods, the same is now expected to stabilise at the current level and gradually improve from June 2026 quarter (Q1FY27). ICRA expects Canara to generate sufficient internal accruals to meet its growth capital requirements while keeping the desired cushion on the capital well above the regulatory levels {including capital conservation buffers (CCB)}. The proposed transitioning to loan loss provisioning, based on the expected credit loss (ECL) framework, on its capital and profitability levels is also expected to be manageable, given the improved capital and profitability position.

 

The headline asset quality indicators continue to improve and the residual vulnerable book, comprising overdue (SMA-1, SMA2)1 and standard restructured advances, witnessed a sustained improvement over the last few years. Further, given the high provision coverage for legacy stressed assets, ICRA expects Canara’s asset quality and solvency position to remain healthy. 

 

However, the asset quality remains monitorable due to loan book seasoning, given the high loan growth in recent years and the likelihood of any shock arising out of the ongoing macroeconomic and geopolitical developments, ICRA said.  ALSO READ | Shakti Pumps stock plunges 14% as Q3 net profit falls 70% 

Meanwhile, Ind-Ra believes Canara’s capital buffers, improved operating profits (ROAs at over 1 per cent), and the ability to raise funds from the equity markets provide it adequate leeway to target a credit growth rate of 11 per cent-13 per cent year-on-year and absorb higher-than-expected credit costs in the medium term.

 

The bank’s special mention account assets of over ₹5 crore accounted for 0.69 per cent of the gross advances as of December 2025, and its restructured assets accounted for a negligible portion of the gross advances. As a result, Ind-Ra expects a limited slippage from these pools. The bank has guided for gross NPAs of 2.5 per cent and net NPA of 0.6 per cent for FY26.

 

Meanwhile, analysts at Motilal Oswal Financial Services reiterated BUY rating on Canara Bank with a revised target price of ₹175 (based on 1.2x Sep’27E ABV+ ₹12 for subs). 

 

Canara Bank reported a mixed quarter with net earnings reporting a beat led by stake sale gains of ₹1,935 crore, while margins contracted 5bp QoQ. NII stood in line, and the bank believes that NIM is close to bottoming out. Loan growth was healthy, driven by robust growth in the retail segment, while deposit growth was modest, with the CASA ratio moderating slightly. Asset quality improved, with slippages too witnessing a reduction, leading to a controlled credit cost for the bank. Canara Bank expects the ECL transition impact to be ₹10,000 crore across stages 1,2 and 3, the brokerage firm said in the Q3 result update.  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.