Canara Bank's (NSE:CANBK) market cap dropped ₹35b last week; State or government bore the brunt

Key Insights

• Canara Bank's significant state or government ownership suggests that the key decisions are influenced by shareholders from the larger public
• India owns 63% of the company
• Institutional ownership in Canara Bank is 17%

To get a sense of who is truly in control of Canara Bank (NSE:CANBK), it is important to understand the ownership structure of the business. We can see that state or government own the lion's share in the company with 63% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 3.2% decline in share price, state or government suffered the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Canara Bank.

View our latest analysis for Canara Bank

What Does The Institutional Ownership Tell Us About Canara Bank?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Canara Bank already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Canara Bank's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Canara Bank. India is currently the company's largest shareholder with 63% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Life Insurance Corporation of India, Asset Management Arm is the second largest shareholder owning 6.2% of common stock, and Estate of Rakesh Jhunjhunwala holds about 1.5% of the company stock.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Canara Bank

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in Canara Bank. Insiders own ₹16b worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Canara Bank. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 1 warning sign for Canara Bank that you should be aware of before investing here.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.