Quarterly Performance Overview
In the quarter ended December 2025, Canara Bank reported a flattening of its financial trend score, dropping sharply from 13 to 5 over the past three months. This shift reflects a deceleration in growth and profitability compared to the bank’s recent historical performance. While the bank achieved its highest-ever interest earned at ₹31,981.60 crore and posted a record net profit after tax (PAT) of ₹5,155.11 crore, several operating metrics deteriorated, signalling emerging challenges.
The bank’s earnings per share (EPS) also reached a peak of ₹5.68, underscoring strong bottom-line growth. However, the profit before depreciation, interest, and tax (PBDIT) plunged to its lowest quarterly level of ₹1,220.11 crore, dragging down the operating profit to net sales ratio to a mere 3.82%, the lowest in recent quarters. This contraction in operating profitability contrasts sharply with the robust top-line growth and highlights margin pressures.
Asset Quality and Income Composition
On the asset quality front, Canara Bank continues to demonstrate resilience. Gross non-performing assets (NPA) stood at a low 2.08%, while net NPAs were an even more impressive 0.45%, both marking the lowest levels recorded in recent quarters. This improvement in asset quality has been a key positive driver for the bank, supporting investor confidence amid a challenging economic environment.
However, the bank’s profit before tax (PBT) excluding other income showed a significant loss of ₹1,194.25 crore, indicating that core banking operations are under strain. Notably, non-operating income accounted for 117.81% of the PBT, suggesting that the bank’s profitability is increasingly reliant on non-core income streams rather than sustainable operational earnings. This reliance raises questions about the quality and sustainability of current profit levels.
Stock Market Performance and Valuation
Canara Bank’s stock price closed at ₹150.30 on 30 January 2026, down 4.75% from the previous close of ₹157.80. The stock traded within a range of ₹148.95 to ₹160.80 during the day, with the 52-week high at ₹160.80 and a low of ₹78.58, reflecting significant volatility over the past year.
Despite recent softness, the bank’s long-term returns have been impressive. Over the past year, Canara Bank’s stock has surged 63.55%, vastly outperforming the Sensex’s 7.88% gain. Over three and five years, the stock has delivered extraordinary returns of 158.34% and 469.32% respectively, dwarfing the Sensex’s 39.16% and 78.38% gains over the same periods. Even on a decade-long horizon, the bank’s 298.25% return surpasses the benchmark’s 231.98%, underscoring its strong growth trajectory in the public sector banking space.
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Financial Trend Shift: From Positive to Flat
Canara Bank’s financial trend parameter, which had been positive in previous quarters, has now shifted to flat. This change is significant as it reflects a plateauing in the bank’s growth momentum. The trend score’s decline from 13 to 5 over three months signals that while the bank is not in decline, it is no longer accelerating its financial performance as it had been.
The flattening trend is largely attributable to the contraction in operating profitability and the negative PBT excluding other income. The bank’s operating profit margin at 3.82% is notably low for a public sector bank of its scale, indicating rising costs or pressure on net interest margins. This is a critical area for investors to monitor, as sustained margin compression could weigh on future earnings growth.
Mojo Score and Rating Update
Reflecting these mixed signals, Canara Bank’s MarketsMOJO score currently stands at 62.0, with a Mojo Grade of Hold. This represents a downgrade from a previous Buy rating as of 28 January 2026. The downgrade acknowledges the bank’s strong asset quality and record earnings but also flags concerns around operating profitability and reliance on non-operating income.
The bank’s market capitalisation grade remains low at 2, consistent with its public sector mid-cap status. This rating suggests that while the stock has delivered strong returns historically, investors should exercise caution given the recent flattening of financial trends and margin pressures.
Comparative Market Context
When compared with the broader market, Canara Bank’s stock has outperformed the Sensex significantly over medium to long-term horizons. However, in the short term, the stock has underperformed the benchmark. For example, over the past week, the stock declined 2.84% while the Sensex gained 0.31%. Year-to-date, the stock is down 2.97% compared to the Sensex’s 3.11% decline, indicating relative resilience but also short-term volatility.
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Outlook and Investor Considerations
Looking ahead, Canara Bank’s ability to sustain its asset quality improvements while reversing the decline in operating profitability will be crucial. The bank’s record-high interest income and PAT demonstrate underlying strength, but the negative PBT excluding other income and low operating margins highlight operational challenges that need addressing.
Investors should weigh the bank’s strong historical returns and improving asset quality against the risks posed by margin compression and reliance on non-operating income. The Hold rating reflects this balanced view, suggesting that while the stock remains a core holding for long-term investors, caution is warranted in the near term.
Market participants will also be watching for management commentary on cost control measures, margin expansion strategies, and the sustainability of non-operating income sources in upcoming earnings calls and reports.
Conclusion
Canara Bank’s December 2025 quarterly results paint a complex picture of a public sector bank at a crossroads. While the bank continues to deliver record earnings and maintain excellent asset quality, the flattening financial trend and operating profit contraction signal emerging headwinds. The recent downgrade to a Hold rating by MarketsMOJO encapsulates this cautious stance, urging investors to monitor developments closely before making fresh commitments.
Given the bank’s impressive long-term returns relative to the Sensex, it remains an important player in the public sector banking space. However, the current quarter’s results underscore the need for vigilance as Canara Bank navigates margin pressures and strives to restore its growth trajectory.
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