Canara Bank shares in focus as PSU lender turns ex-date for stock split; full details

Shares of Canara Bank are in focus on Wednesday morning as the stock turns ex-date for stock split. The PSU bank had also fixed Wednesday, May 15 as the record date for the purpose of determining entitlement of equity shareholders for the purpose of sub division of shares of the bank, such that one equity share having face value of Rs 10 each fully paid up, is sub-divided into five equity shares having face value of Rs 2 each, fully paid up, ranking pari-passu in all respects.

In a stock split, already owned shares are split into shares of smaller face values in a bid to improve liquidity on the counter. There is no impact on share capital. It is different from bonus share where free additional shares given to existing shareholders based on number of shares owned. Bonus shares are announced to distribute gains of accumulated earnings without paying cash to the shareholders. It reduces reserves and money is moved to share capital as new shares are issued.

In the case of Canara Bank, the stock has rallied 87 per cent in the past one year. The government owned 62.93 per cent stake in this PSU lender at the end of March quarter.

Canara Bank recently announced an in line March quarter results came. The lender posted 18 per cent growth in standalone net profit at Rs 3,757 crore for the quarter against Rs 3,174 crore YoY. Its net interest income (NII) grew 11 per cent year-on-year (YoY) to Rs 9,580 crore while its gross non-performing assets ratio declined to 4.23 per cent from 4.39 per cent sequentially.

Analysts noted that the PSU bank's Q4 net interest margin (NIM) expanded marginally, despite a rise in cost of funds, thanks to the bank's gradual efforts to rejig exposure of older low yielding corporate book by either renewing them at current yields or by replacing them with other products that offer more favourable returns.  All eyes would be on provision reversal going ahead, analysts said.

Motilal Oswal maintained its 'Buy' recommendation on the stock with a target price of Rs 650. Kotak Institutional Equities finds the stock worth Rs 530.