Buy call on canara bank

Buy Canara Bank with a target price of Rs 278. In 1st Q FY09, we expect the bank would report marginal growth of 3.1% (Y-o-Y) in NII to Rs 9.2 billion; flat growth in NII would be due to higher cost of funds; higher proportion of whole-sale deposits would dent NII growth. Also lower yield on advances and decline in CASA share would lead to pressure on net interest margin.estimated operating profit to record 6.0% growth (Y-o-Y) to Rs 6.48 billion. We estimate that in FY2009, Canara Bank's net profit would de-grow by 2.7% to Rs 15.2 billion compared to Rs 15.6 billion in FY2008 therefore considering the bank's financial performance the stock may not give required return.