Equirus SecuritiesTarget: ₹155CMP: ₹124.30Canara Bank reported an in-line NII, with flattish NIMs at 2.52 per cent (lower end of the SOE bank NIM range). The 22bps q-o-q CoF benefit was largely passed on to borrowers, resulting in a 29bps q-o-q decline in yield on advances.The bank continues to replace bulk deposits with retail CASA and term deposits. Management currently sees 20-30bps CoF benefits on incremental deposits, supporting NIMs in 2QFY27.It has guided to FY27 NIMs of 2.5-2.6% and intends to improve the CASA ratio to drive medium-term margin expansion. CBK has mobilised US$ 775mn of FCNR(B) deposits, and targets total mobilisation of US$ 2.5bn.Advances grew 5 per cent q-o-q, aided by healthy retail (+36 per cent y-o-y/+7 per cent q-o-q) and MSME (+15% y-o-y/+7% q-o-q) growth, while corporate advances grew 4 per cent q-o-q.Slippages moderated to 58bps (vs 94bps q-o-q), while GNPA/NNPA ratios improved to 1.6/0.4 per cent (vs 1.8/0.4 per cent q-o-q).We expect FY27E RoA of about 1 per cent, supported by healthy PSLC fee income and sustained recoveries. However, near-term NIMs are likely to remain constrained, and we therefore build in flattish margins.Slippages are expected to stay in check. Sustained improvement in the liability franchise and NIM expansion, rather than incremental loan growth, will be the key catalysts for earnings upgrades and valuation re-rating. Retain Long with an unchanged Mar’27 TP of Rs 155.Published on July 28, 2026