Stock Split Alert: This PSU Stock Prepares for First Ever Stock Split

A stock split, as the name suggests, is the reduction in the face value of a stock and, thereby, a corresponding increase in the number of outstanding shares.

Although stock splits don't impact business fundamentals, they can boost investor interest in a company and signify that it is moving in the right direction.

Joining the list of companies declaring stock splits in February, PSU Bank stock Canara Bank recently announced about its stock split plan.

Here's all you need to know.

• Canara Bank on Wednesday (7 February 2024) said it is planning a split of the equity shares of the state-owned bank to boost the stock's liquidity.
• The decision for the same will be taken by the bank's board of directors in a meeting scheduled on 26 February.
• The meeting's agenda involves seeking in-principle approval for the sub-division/split of equity shares, contingent upon prior approval from the Reserve Bank of India (RBI).
• The split ratio and record date for the same will be announced after the board meeting.

This will be Canara Bank's first-ever stock split, in case the proposal is approved.

The lender has not issued a bonus share either in its history. The last major corporate action it carried out was a rights issue in February 2017.

Canara Bank had last year declared a dividend of Rs 12, which was the highest payout by the lender in a decade.

A stock split is done to increase the stock liquidity in the market. Investors who are holding the stock till the record date will receive the new shares in demat accounts, and the stock price will be adjusted according to the split ratio.

A Look at the PSU Bank's Financials

The bank posted a nearly 27% YoY rise in its standalone net profit to Rs 36.6 bn in the December 2023 quarter, helped by a 9.5% YoY growth in its NII.

Canara Bank reported NIMs of 3.03% in the third quarter of FY24, broadly flat YoY.

The asset quality of the bank was also good. The percentage of net non-performing assets was 1.32% in the third quarter of FY24 vis-a-vis 1.96% a year earlier.

In the financial year 2023, Canara Bank's profit crossed Rs 100 bn for the first time.

It reported a net profit of Rs 106 bn in the financial year 2023, up 86.8% In FY23, the Net Interest Income (NII) rose by 19.2% to Rs 32.8 billion, driven by credit growth and positive sectoral trends.

Between FY21 and FY23, the company posted a CAGR growth of 9.5% in its net interest income. Along with the revenues, the net profits have also increased by a CAGR of 58.8% during the last three years.

Canara Bank Financial Snapshot (2021-2023)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Net Interest Income (Rs in bn)	250.1	275.8	328.9
NII Growth (%)	79.8	10.3	19.2
Net Profit (Rs in bn)	27	57.9	108.1
Net profit Margin (%)	4.1	8.7	13.1
Net Interest Margin (%)	2.7	2.7	2.8

Data Source: Equitymaster

For FY23, Canara Bank stands among the top Indian banks that posted record-high profits.

Going forward, the company plans to increase its profitability by adding more branches.

What Next?

In a big development, Canara Bank recently expressed its intention to list its mutual fund subsidiary.

Once listed, this will mark the fifth mutual fund company to go public in India, following the footsteps of HDFC AMC, Nippon Life India AMC, UTI Asset Management Company, and Aditya Birla Sun Life AMC. This move is expected to boost Canara Bank's profitability.

Plans to disinvest this subsidiary could possibly go up to FY25.

The bank has seen strong recoveries from written off accounts over the last two quarters. This trend is expected to continue.

Going forward, the bank is also planning to open a branch in Gift City for global corporate lending.

How Shares of Canara Bank have Performed Recently

The share price of Canara Bank has climbed by 26% in the past one month.

Over the past one year, shares of the company have rallied 94%. In the past five years, shares have delivered multibagger returns of over 165%.

The company touched its 52-week high of Rs 579.9 on 8 February 2024 and its 52-week low of Rs 268.8 on 24 February 2023.

About Canara Bank

Canara Bank is one of the largest Indian government owned banks. It's under the ownership of Ministry of Finance, Government of India.

The bank operates in four segments namely treasury operations retail banking operations wholesale banking operations and other banking operations. It provides a range of products and services to the customers.

Canara Bank has a strong pan India presence. Across the borders the bank has 8 branches one each at London, Leicester, Hong Kong, Shanghai, Manama, Johannesburg, New York, and DIFC (Dubai), and a representative office at Sharjah UAE.

For more details about the company, you can have a look at Canara Bank factsheet and quarterly results on our website.

You can also compare Canara Bank with its peers.

Canara Bank vs Punjab National Bank

Canara Bank vs State Bank of India

Canara Bank vs Bank of India

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