1:5 Stock Split: 1 Canara Bank Share To Split Into 5 Shares; PSU Nears 1-Year High, Meets Motilal's TP

PSU lender, Canara Bank is the talk of the town on Tuesday as the bank has announced its first-ever stock split. 1 Canara Bank's share price which is trading near Rs 580 will split into 5 new shares. The record date will be announced in due course. But that's not all, RBI has also imposed a monetary penalty of Rs 32.30 lakh on Canara Bank due to a violation of guidance. Nonetheless, Canara Bank traded higher and neared its 52-week high.

Canara Bank Share Price:

At the time of writing, Canara Bank's share price traded at Rs 577.80 apiece on BSE, up by 0.9% with a market cap of Rs 1,04,820.45 crore. The stock touched an intraday high of Rs 584.50 apiece, which is near its 52-week high of Rs 598.75 apiece.

Canara Bank is a multi-bagger though. The stock has zoomed by 116.68% from its 52-week low of Rs 269.75 apiece as of now.

Canara Bank:

The rally in Canara Bank can be attributed to the much-awaited stock split announcements. On February 26, in a board meeting, Canara Bank received approval for stocks sub-division into the ratio of 1:5. It means that the current face value of Rs 10 per share of Canara Bank will soon be splitting into Rs 2 per share.

As per the regulatory filing, Canara Bank said, "The Board of Directors of the Bank at its meeting held on, i.e Monday, 26th February 2024, inter alia, approved Sub-division/ split of every one equity share of face value of Rs. 10/- (Rupees ten only) each, fully paid-up, into 5 (five) equity shares of face value of Rs. 2 /- (Rupee two only) each, fully paid-up, subject to approval of the Reserve Bank of India."

The rationale behind the stock split is to improve the liquidity of the Bank's shares to make it affordable for retail investors and also to broaden the retail investors' base. Further, the bank plans to complete its stock in 2 to 3 months from the intimation of the date of the Board Meeting to the stock exchange, which is on February 7, 2024.

Canara Bank RBI Penalty:

RBI also on February 26, imposed a a monetary penalty of Rs 32.30 lakh for non-compliance with certain directions issued by RBI on 'Data Format for Furnishing of Credit Information to Credit Information Companies and other Regulatory Measures', 'Resolution Framework 2.0 - Resolution of Covid-19 related stress of Micro, Small and Medium Enterprises (MSMEs)' and 'Resolution Framework - 2.0: Resolution of Covid-19 Related Stress of Individuals and Small Businesses'.

The penalty came after the Supervisory Evaluation (lSE 2022) of the bank by RBI concerning its financial position as of March 31, 2022. The examination of the Risk Assessment Report/Inspection Report about ISE 2022, and all related correspondences in that regard, revealed, inter alia, non-compliance with the aforesaid directions by the bank, to the extent it (i) failed to rectify the rejected data and upload the same with the Credit Information Companies (CICs) within seven days of receipt of such rejection report from the CICs and (ii) restructured certain accounts which were not standard assets as on March 31, 2021 under the extant directions.

Amidst the findings in the evaluation, RBI issued a notice to the bank advising it to show cause as to why a penalty should not be imposed on it for failure to comply with the said directions, as stated therein.

RBI said, "After considering the bank's reply to the notice, and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty."

Canara Bank Target Prices:

As of the latest, Motilal Oswal has recommended buying Canara Bank with a target price of Rs 570, which the lender surpassed on February 27.

Meanwhile, as per Trendlyne data, the consensus recommendation from 14 analysts for Canara Bank is BUY. EPS is expected to grow by 37.2% in FY24. Canara Bank's Revenue was higher than average estimated 3 times in the past 3 years.

Also, the data revealed that Canara Bank's weekly average delivery volume is 34.05%, while the stock is trading above 8 out of 8 SMAs, and above 5 out of 9 Oscillators in the bullish zone.

Further, Way2Wealth said, "It has various near-term key developments like stock-split, fund raising and possible inclusion in Bank NIFTY index. Multiple levers are in place for the bank to positively impact its price performance. Thus, we remain positive on the stock and arrive at a target price of Rs 670, implying 0.96x FY26e P/BV. Hence we recommend to BUY at the current valuation."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.