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Corp. Bank: Nothing surprising

May 22, 2002

Corporation Bank has reported a dismal 3% rise in fourth quarter interest income and flat profits. Although the bank's net interest income has shown an improvement for the quarter, higher costs have resulted in an operating profit decline.

(Rs m)4QFY014QFY02ChangeFY01FY02Change
Income from operations 4,716 4,874 3.3% 18,045 19,457 7.8%
Other Income 921 961 4.3% 2,921 3,819 30.8%
Interest expense 3,307 3,390 2.5% 12,232 13,205 8.0%
Net interest income 1,409 1,483 5.3% 5,813 6,252 7.5%
Other expenses 949 1,037 9.3% 3,414 3,842 12.6%
Operating Profit 460 446 -3.0% 2,400 2,410 0.4%
Operating Profit Margin (%)9.8%9.2% 13.3%12.4% 
Provisions and contingencies 546 5918.2% 1,352 1,62220.0%
Profit before Tax 835 816-2.2% 3,969 4,60816.1%
Tax 382 363-5.0% 1,351 1,52713.0%
Extraordinary items - -   - -  
Profit after Tax/(Loss) 453 4540.1% 2,618 3,08117.7%
Net profit margin (%)9.6%9.3% 14.5%15.8% 
No. of Shares (m) 120.0 143.4   120.0 143.4  
Diluted Earnings per share*12.612.7 18.321.5 
P/E Ratio 9.9   5.8  
*(annualised)      

During the quarter, the bank's cost to income ratio increased to 42% from 41% in the comparable previous quarter. Also, growth in other income was at marginal 4%. Other income accounted for 16% of total income of the bank for FY02. The bank is facing strong competition in its cash management services business from private sector banks which trimmed the growth of its fee based income stream.

Interest income breakup
(Rs m)4QFY014QFY02ChangeFY01FY02Change
Interest on advances 2,309 2,471 7.0% 9,341 9,969 6.7%
Income from investments 1,898 2,144 12.9% 7,438 8,237 10.7%
Interest on balance with RBI 286 194 -32.3% 937 913 -2.5%
Others 222 66 -70.5% 329 338 2.6%
Total 4,716 4,874 3.3% 18,045 19,457 7.8%

On a consolidated basis, Corp. Bank has reported net profits of Rs 3,731 m, which is 21% higher than its reported profits of Rs 3,081 m on a standalone basis. The higher profits are on account of strong performance of its housing finance subsidiary, Corp. Homes and gilt subsidiary, Corp. Securities.

At the current market price of Rs 125, Corp. Bank is trading at a P/E of 6x FY02 earnings. Its adjusted price to book value ratio (after adjusting networth for subsidiaries profits and net non-performing assets) is less than 1x. The bank is expected to record profit growth in the range of 20% CAGR for the next three years.

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