Canara Bank has received an approval to divest its stake either in part or in full in the domestic subsidiaries or associates namely Canara Robeco Asset Management Co, Canbank Computer Services and Can Fin Homes. The board of directors at their meeting held on November 20, 2017, has approved for the same. The Bank has empanelled Investment Bankers / Merchant Bankers for this purpose.
The bank has 30% and 51% stake in Canfin Homes and Canara Robeco AMC respectively. The divestment would act positive for the bank as it would improve the capital adequacy ratio which in turn would partly fund future loan growth. Canara Bank’s improving asset quality, better NIM prospects and rising noninterest income bodes well for its profitability over FY17-19E. The bank is trading at ~2.2x FY19E P/ABV. We have positive outlook on the stock.