Federal Bank, Canara Bank: 2 Jhunjhunwala banking bets to share Q1 results today. Analyst views

Two of Rekha Jhunjhunwala's banking stock bets Federal Bank and Canara Bank are scheduled to report June quarter results today. The banks are expected to report a 30-55 per cent surge in profit on a 20 per cent-plus growth in net interest income (NII). Net interest margins (NIM) is seen falling marginally on sequential basis. Asset quality for both the banks is expected to stay stable.

Kotak Institutional Equities expects Canara Bank to report a 54 per cent YoY surge in net profit at Rs 3,115 crore on 25.3 per cent YoY rise in NII at Rs 8,498 crore. It sees pre-provision profit (PPOP) rising 7.5 per cent YoY to Rs 7,103 crore. NIM is expected to see a marginal QoQ decline driven by jump in cost of deposits.

"We expect slippages at 1.4 per cent, but the trend of GNPL decline continues due to high recoveries and upgradations. We expect discussion to focus on operating profit growth and its drivers given that asset quality has improved significantly for the bank. Provisions are likely to be lower QoQ at 1.3 per cent, mainly toward improving PCR," it said.

In the case of Federal Bank, the private lender is expected to report 30.4 per cent jump in profit at Rs 783 crore. It sees NII rising 21.8 per cent YoY to Rs 1,954 crore.

"The bank has reported a solid loan and deposit growth at 21 per cent YoY. CASA deposits is growing slower than deposit growth. We expect NII growth at 22 per cent YoY with NIM marginally lower QoQ (the bank saw peak NIM compression QOQ). We expect operating profit growth of 23 per cent YoY on the back of better cost ratios as well," Kotak said.

Motilal Oswal Securities pegs Canara Bank's profit at Rs 3,110 crore, up 53.6 per cent YoY. It sees NII at Rs 8,420 crore, up 24.20 per cent YoY. The brokerage expects business growth for Canara Bank to remain steady. It sees cost ratios to remain elevated while margins to remain broadly stable.

As far as Federal Bank goes, Motilal Oswal Securities sees profit at Rs 842.80 crore, up 40.30 per cent YoY. NII is seen at Rs 1,964 crore, up 22.4 per cent YoY. Motilal Oswal said credit growth for Federal Bank remained healthy, driven by robust growth from new businesses and fintech partnerships. It expect costs of funds to increase. Margin commentary, asset quality and loans under restructuring are key monitorables, the brokerage said.

Rekha Jhunjhuwala held about 3.5 per cent stake in Federal Bank as on June 30. She held 2.07 per cent stake in Canara Bank at June-end.

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