InvestorQ : I am planning to choose between buying Allahabad Bank and Canara Bank. I want your view on which stock to prefer after the latest results of the company?
Juvina Maggie made post

I am planning to choose between buying Allahabad Bank and Canara Bank. I want your view on which stock to prefer after the latest results of the company?

Answer
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Anamika Sodhani answered.
2 years ago
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Both Allahabad Bank and Canara Bank are PSU banks that come with a legacy of NPA problems over the last few years. If you were to look at the latest quarter results for March 2019, then Allahabad has reported a much bigger loss of Rs.3834 crore which is largely due to mounting bad loans at the bank. In March 2018, the loss was Rs.3509 crore and so the situation has only worsened in the last one year despite the bank coming out of Prompt Corrective Action (PCA). In fact, for the full year Allahabad Bank losses almost doubled to Rs.8457 crore. The worry is that gross NPAs for Allahabad Bank have actually gone up from 15.96% to 17.55%. Net NPAs were down to 5.02% but that is more because most of the losses have been more or less provided for.

On the other hand, Canara Bank has seen its losses narrowing in the fourth quarter to Rs.551 crore compared to Rs.4860 crore in the previous year March quarter. Canara Bank also saw a 20% growth in net revenues for the quarter. In fact, if you look at the full year then Canara Bank has actually reported a profit of Rs.372 crore compared to a loss of Rs.4222 crore in the previous financial year. For the fourth quarter, the gross NPAs of Canara Bank actually fell from 11.84% to 8.84%.

While both Allahabad Bank and Canara Bank have made losses, it is clear that Allahabad is still worsening its asset quality while Canara Bank is improving its asset quality. Of the two banks, if you want to buy you should prefer Canara Bank over Allahabad Bank.
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K V RAO answered.
2 years ago
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Avoid financial sector stocks. Both the stocks under reference represent Government ownership and has its pitfalls. When there are plenty of commodity/services sector stocks, why invest in bank stocks. If you are particular about bank stocks, I strongly recommend HDFC Bank and Kotak Mahindra. Here also scope for appreciation in the short term is quite limited but in the long run these stocks can give you appreciation in the range of 15-20%.

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