The Government of India is mulling consolidation in the public sector banking space and Canara Bank is expected to one of the anchor bank/acquiring bank. This creates very high level of uncertainty for its future earning trajectory as balance sheet quality of several smaller public sector banks is considered to be pathetic. Further, we expect the Bank will continue to witness elevated level of credit cost, which will keep its earnings and return ratios subdued over next 6-8 quarters. We have cut our PAT and adjusted book value estimates for FY19E by 21.2% and 9.1%, respectively due to sharp QoQ rise in net NPA (+12.2% QoQ) and rise in credit cost guidance. We reiterate our HOLD recommendation on the stock with a downwardly revised...