Federal Bank, Canara Bank: Jhunjhunwala Banking Bets Set to Share Q1 Results Today; Analysts Optimistic

Federal Bank, Canara Bank: Jhunjhunwala Banking Bets Set to Share Q1 Results Today; Analysts Optimistic
Canara Bank

Two of Rekha Jhunjhunwala’s prominent banking bets, Federal Bank and Canara Bank, are poised to unveil their financial results for the first quarter of the fiscal year. Market analysts are optimistic about the prospects of these banking giants, with expectations of significant profit surges and robust growth in net interest income (NII). Both banks are anticipated to maintain stable asset quality, instilling further confidence among investors.

Kotak Institutional Equities has predicted a robust 54% year-on-year (YoY) increase in Canara Bank’s net profit, reaching Rs 3,115 crore, along with a 25.3% YoY rise in NII to Rs 8,498 crore. Additionally, the bank’s pre-provision profit (PPOP) is expected to rise by 7.5% YoY to Rs 7,103 crore. Despite a marginal decline in net interest margins (NIM) on a sequential basis, driven by increased costs of deposits, the overall outlook for the bank remains optimistic.

“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 towards improving PCR,” Kotak Institutional Equities stated.

Meanwhile, Federal Bank, another key player in Jhunjhunwala’s portfolio, is expected to report an impressive 30.4% YoY surge in profit, amounting to Rs 783 crore. The bank’s NII is projected to rise by 21.8% YoY to Rs 1,954 crore. According to analysts at Motilal Oswal Securities, Federal Bank has exhibited solid loan and deposit growth at 21% YoY, driven by strong performances from new businesses and fintech partnerships. However, they anticipate an increase in costs of funds. The brokerage highlights that the bank’s margin commentary, asset quality, and loans under restructuring will be key points of interest for investors.

Canara Bank, one of India’s leading public sector banks, is expected to demonstrate significant progress in its financials. Motilal Oswal Securities projects the bank’s profit to reach Rs 3,110 crore, representing a substantial 53.6% YoY growth. Moreover, NII is anticipated to reach Rs 8,420 crore, reflecting a commendable 24.20% YoY increase. While the business growth for Canara Bank is likely to remain steady, the brokerage notes that cost ratios may rise while margins are expected to remain broadly stable.

As the two banks gear up to present their quarterly results, investors are keenly watching the developments in Jhunjhunwala’s holdings. As of June 30, Rekha Jhunjhunwala held approximately 3.5% stake in Federal Bank and a 2.07% stake in Canara Bank.

The outcome of these Q1 results has the potential to significantly impact the banking sector’s sentiment and may provide crucial insights into the prevailing economic conditions. Market participants and stakeholders eagerly await the announcements, as they seek cues for their investment strategies and decisions in the current financial landscape.

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