Corporation Bank: Losing steam - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Corporation Bank: Losing steam

Apr 27, 2004

Corporation Bank, continuing with its dull performance in the last quarter has reported its FY04 results. The bank has reported a 5% topline growth and a 21% bottomline growth for the full year. While it has managed to improve further upon its net interest margins and consequently its operating margins, the bottomline growth seems to have been mainly effected by a strong fall in provisioning for NPAs. Infact, if the provisioning were to be kept at the FY03 levels, the bottomline growth would have been stagnant. For the March quarter, while the topline has risen by 4%, the bottomline improvement stood at 153% on a YoY basis.

(Rs m)4QFY034QFY04ChangeFY03FY04Change
Income from Operations 5,308 5,532 4.2% 21,025 22,012 4.7%
Other Income 1,262 952 -24.5% 5,318 5,168 -2.8%
Interest Expenses 3,415 3,073 -10.0% 13,104 12,372 -5.6%
Net interest income 1,893 2,459 29.9% 7,921 9,639 21.7%
Other Expenses 1,447 1,604 10.9% 4,714 5,737 21.7%
Operating Profit 446 855 91.6% 3,208 3,903 21.7%
Operating Profit Margin (%)8.4%15.5% 15.3%17.7% 
Provisions and Contingencies 838 -199- 2,259 1,355 -40.0%
Profit before Tax 870 2,006 130.7% 6,266 7,715 23.1%
Tax 397 811104.5% 2,106 2,674 26.9%
Profit after Tax/(Loss) 473 1,195 152.7% 4,160 5,041 21.2%
Net Profit Margin (%)8.9%21.6% 19.8%22.9% 
No. of Shares (m) 143.4 143.4   143.4 143.4  
Diluted Earnings per share*13.233.3 29.035.1 
P/E Ratio    9.5 

For FY04, the bank has seen a 16% rise in its advances. However, we would like to point out that this growth rate is only marginally higher than the period ending December number of 15%. This is relevant as the March quarter is the period in which credit offtake normally picks up for the banking sector. Corporation Bank's growth rate indicates that it has still not got its act together as far as asset growth is concerned. The concern regarding the bank's slowdown in this aspect has been highlighted since the last few quarters. While banks like OBC and SBI (despite being larger) have reported better growth in advances, Corporation Bank seems to be lagging behind. Even private sector banks like IDBI Bank and UTI Bank have reported a much larger growth in advances till the period ending December. The only noteworthy aspect of the growth has been the expansion in the retail assets. However, this is nothing out of the ordinary, as almost all the banks are witnessing similar growth rates.

The marginal growth in topline may be due to the relatively slower growth in advances, as well as falling yields. The bank however, has significantly offset the slow growth in topline with a significant fall in interest expenses. This has been brought about by leveraging upon low cost retail deposits. The table below indicates the growth in the same. The fall in interest expenses has led to further improvement in the net interest margins (NIM) and consequently the operating margins of the bank. The NIM has improved to 3.8% from 3.6% last year. Operating margins have further improved due to control over operating expenses (up 240 basis points).

Advances (Rs m)120,292138,89715.5%
Retail advances (Rs m)23,55039,54067.9%
% of total19.6%28.5% 
Deposits (Rs m)217,246231,9096.7%
Cost of deposits6.7%5.5% 
Demand deposits (Rs m)61,97978,83227.2%
% of total28.5%34.0% 

There has been a fall in other income in FY04. This may be on account of a fall in treasury profits (G-Sec portfolio) especially in the December quarter. For most public sector banks the bottomline growth over the years has been driven by strong treasury gains. For Corporation Bank these treasury gains seem to be slowly falling and consequently they are impacting the bottomline of the bank. Also in FY04, there has been a strong fall in provisioning and this has helped shore up the bottomline. Infact, due to lower provisioning and converting to the 90-day overdue norm, the net NPA to advances ratio has risen to 1.8% from 1.6% last year.

At the current market price of Rs 338, Corporation Bank is trading at a price to book ratio of 1.8x. Corporation Bank does not seem to be coping well with competition and this is reflected in the bank's inability to improve credit offtake from the corporate segment. Investors need to concentrate on the performance of the bank with respect to its ability to deploy capital at a healthy yield. The bank has fallen short of all our expectations in FY04, and considering its performance we will have to revise all our estimates downward for FY05. Unless Corporation Bank gets its act together it may fail to capitalise on the opportunities in the highly competitive and evolving banking sector.

Equitymaster requests your view! Post a comment on "Corporation Bank: Losing steam". Click here!


More Views on News

CORPORATION BANK Announces Quarterly Results (2QFY20); Net Profit Up 26.0% (Quarterly Result Update)

Nov 14, 2019 | Updated on Nov 14, 2019

For the quarter ended September 2019, CORPORATION BANK has posted a net profit of Rs 1 bn (up 26.0% YoY). Sales on the other hand came in at Rs 40 bn (up 0.9% YoY). Read on for a complete analysis of CORPORATION BANK's quarterly results.

CORPORATION BANK Announces Quarterly Results (1QFY20); Net Profit Up 21.6% (Quarterly Result Update)

Aug 5, 2019 | Updated on Aug 5, 2019

For the quarter ended June 2019, CORPORATION BANK has posted a net profit of Rs 1 bn (up 21.6% YoY). Sales on the other hand came in at Rs 40 bn (down 4.9% YoY). Read on for a complete analysis of CORPORATION BANK's quarterly results.

How the YES Bank Collapse Unfolded - 10 Points (Sector Info)

Mar 9, 2020

A timeline of how YES Bank went from a stock market darling to a pariah.

Today's Stock Market Crash: 10 Points (Sector Info)

Mar 6, 2020

Top factors that dragged the markets lower today.

More Views on News

Most Popular

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

A Stock with 700% Return Potential Comes with Additional Payoffs (Profit Hunter)

Apr 15, 2021

Narayana Murthy was one of the first unicorn founders to get the backing of this entity...

Why Did the Market Crash on Monday? (Fast Profits Daily)

Apr 13, 2021

In this video, I'll you what I think is the real reason behind yesterday's market crash.

A Unique Sector for Short-Term Profits (Fast Profits Daily)

Apr 12, 2021

This ignored sector could deliver big short-term profits.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Mar 19, 2020 (Close)


  • Track your investment in CORPORATION BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks