Canara Bank vs Federal Bank: How much upside can these Jhunjhunwala portfolio stocks deliver?

Out of three Rakesh Jhunjhunwala portfolio banks, two, namely Canara Bank and Federal Bank, have delivered a healthy set of earnings in the September quarter. 

State-owned Canara Bank posted an 89 per cent increase in its net profit to Rs 2,525 crore for the quarter ended September 30, on the back of robust growth in net interest income and decline in bad loans. On the other hand, Kerala-based private sector lender Federal Bank’s profit grew 50 per cent to Rs 733.34 crore in Q2, owing to a strong growth in both interest and other income streams.

Brokerages see up to 31 per cent upside potential and suggested ‘buy’ ratings on the two counters.

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For Canara Bank, Motilal Oswal Securities said the lender reported “a healthy performance” in Q2 and maintained ‘buy’ with a target price of Rs 340, a 31 per cent upside from a market price of Rs 259.

Emkay Global Financial Services also retained ‘buy’ rating on the stock with a target price of Rs 330, an estimated uptick of around 27 per cent.

JM Financial Institutional Securities kept ‘buy’ rating for a target price of Rs 280.

For Federal Bank, Motilal Oswal, retained ‘buy’ rating with a target price of Rs 155, a 19 per cent upside from a market price of Rs 130.

“Federal Bank remains our preferred pick among mid-sized banks and we estimate it to deliver an RoA/RoE (return on asset/return on equity) of 1.2 per cent/14.2 per cent in FY24 (2023-24),” the brokerage added.

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Anand Rathi also maintained ‘buy’ rating as the lender’s return of assets continued in second-quarter. The brokerage projected a target price of Rs 150, up 15 per cent from previous close of Rs 130.30.

Kush Ghodasara, an independent market expert, said the bank “is one of the most out performing bank and charts are looking super strong.” The stock “has given multiple years breakout at Rs 111 and can be bought for a target price of Rs 165,” he added.

Late ace investor Rakesh Jhunjhunwala’s portfolio has a 1.48 per cent stake in Canara Bank. Jhunjhunwala and his wife Rekha hold a 4.63 per cent stake in Federal Bank. Also, Karur Vysya Bank is among the other bank stocks under the Jhunjhunwala portfolio.

Meanwhile, Indian equity benchmarks extended their winning run for the sixth straight session in today’s trade, lifting the festive mood further despite weak global cues. One of the top reasons for this surge has been a strong buying interest in banking stocks. Sub-index Nifty Bank briefly crossed the 41,000 mark during intraday deals today.