Canara Bank Share Price In Focus: 1:10, 1:5, 1:2, 1:1, What Will Be This PSB's First Stock Split Ratio?

Public sector lender, Canara Bank will be announcing its first-ever stock split in the coming days. The PSB is in focus accordingly. On Wednesday, Canara Bank touched Emkay Global's target price of Rs 550, while it is moving closer to Motilal Oswal's target price of Rs 570 despite the stock trading volatile. The question is how much will Rs 550 per share of Canara Bank be subdivided as part of the ratio?

Canara Bank's share price traded at Rs 550.50 apiece, down by 0.30% on BSE with a market cap of Rs 99,867.87 crore, at the time of writing. The stock ranged from Rs 551.50 apiece to Rs 543.05 apiece on Wednesday.

In its latest research note for Canara Bank, Emkay Global had set the share price target at Rs 550 while upgrading its outlook to BUY from ADD on the PSB.

Emkay's note said, "Bank guidance for 2023 NIMs is 2.9-3%, on better cost management and portfolio mix, incl. the high-yielding RAM segment. Bank has identified 2 subsidiaries for divestment over the coming 12M which should supplement its otherwise moderating CET 1 (11.3%). We revise FY24/25/26 estimates upward by 1%/6%/1.5%, mainly building-in contained provisions and better other income, while we expect healthy RoA/RoE of ~1%/18-20% during FY24-26E (excl. capital raise). Given strong RoE delivery, we now value the stock at 1x its Dec-25E ABV vs. 0.8x its Sep-25E ABV earlier, and subsidiaries at Rs30/share, leading to a revised TP of Rs550/share (from Rs450). We also upgrade the stock to BUY from Add."

After Q3 earnings, the next focus in Canara Bank is its stock splits announcement. In its regulatory filing, Canara Bank said, a meeting of the Board of Directors of the Bank is scheduled to be held on Monday, 26th February 2024, to seek in-principle approval from the Board of Directors for Sub-Division/Split of the Equity Shares of the Bank subject to prior approval of Reserve Bank of India (RBI) and other Statutory/Regulatory/Government of India approvals, as may be required.

While it's still unknown what will be Canara Bank's stock split ratio, there are some popular ones out there that which majority of listed stocks pick for their split ratio. They are 1:10, 1:5, 1:2, and 1:1. But it is up to the listed companies to decide their stock splits ratio.

A 1:10 ratio means that 1 existing share will be subdivided into 10 new shares. Similarly, a 1:5 and 1:2 stock splits ratio means 1 existing per share will be split into five and two new shares. The case is the same for the 1:1 stock splits ratio as well. When stocks are split, their face value gets trimmed as well. For instance, a 1:10 share split would mean 1 existing share price of a listed company having a face value of Rs 10 each, which will be subdivided into 10 shares having a face value of Re 1. In the case of 1:5, the face value of Rs 10 will be subdivided into Rs 2 each.

In stock splits, there are more number of shares, and face value reduces on them. Share splits mean that listed companies can split their existing shares into a ratio decided by them for a host of reasons. These could be done to improve liquidity, lessen the value of the stock, make it cheaper or simply attract new buying from both existing and new investors.

Hence, chances are that Canara Bank's stock split ratio could be 1:10, 1:5 1:2 or 1:1.

The next target price in Canara Bank is Rs 570 recommended by Motilal Oswal with BUY outlook.

Disclaimer: The stock highlights stock splits and performances, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.