Canara Bank Share Price Decline Persists. Headed to 2-Month Lows?

Summary:
• Canara Bank share price is on a free-fall despite the state-owned bank reporting profits on Wednesday. We discuss its potential trajectory.

Canara Bank share price tanked on Thursday despite reporting profits in its fourth quarter of 2023-2024 fiscal year. At the time of writing, CANBK traded at Rs 556.0, down by 0.30 per cent at the time of writing, which was a pileup on the 3.3% decline on Wednesday. With a quarterly gain of 2.8%, Canara Bank’s earnings for the fiscal quarter ending March 31, 2024, was Rs 3,757.23 crore.

The bank reported that domestic deposits stood at Rs 1.22 lakh crore, an increase of 10.98% year-on-year, while global business climbed by 11.31% year-on-year to Rs 2.28 lakh crore. The retail loan sector also saw a gain of 11.68 percent year-on-year, reaching Rs 1.56 lakh crore. Canara reported an 11 per cent increase in total advances to 9.60 lakh crore.

At the forefront of this growth was retail loans, which grew by 12%, and agriculture and allied activities funding, which rose by 19%. The increase in lending rates allowed the bank to offset the change in the cost of funds, leading to an increase in the net interest margin (NIM) from 2.95 percent to 3.05 percent. The bank’s provisions declined from Rs 3,095 crore to Rs 2,482 crore, equivalent to a reduction of 20% YoY.
However, the current decline in the share price is as a result of a weaker forecast by the bank for the 2024-25 fiscal year. For the coming year, Canara Bank anticipates a slowdown in loan and deposit growth compared to the 2023-2024 fiscal year, as well as a contraction in net interest margins. However, it anticipates a 9% increase in deposits and a 10% increase in loans. Ultimately an extension of the current 6.5% interest rate regime could impact the bank’s earnings.

Technical analysis

The momentum on Canara Bank share price is currently tilted in favour of the sellers, with the pivot at 558.60. A continuation of the downside is likely if resistance persists at that level. That could result in breaching of the support at 546.00 and potentially extending to 534.00. However, the buyers will likely take control if they swing the share price above 558.60. That could help them move the price up to 568.85, where they will meet the next resistance. A continuation of control by the bulls will likely break the resistance, thus negating the downside narrative and potentially moving the price up to 579.80.