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Corp Bank: Higher provisions deter profits
May 30, 2013

Corporation Bank declared its results for the fourth quarter of the financial year 2012-2013 (4QFY13). The bank has reported 12% YoY growth in net interest income and negligible 1% YoY growth in net profit. Here is our analysis of the results.

Performance summary
  • Interest income grows by decent 13% YoY in 4QFY13, on the back of healthy 18% YoY growth in advances. Net Interest Income (NII) grows again by decent 12% for 4QFY13.
  • Net interest margin (NIM) dropped to 2.3% (FY13) from 2.5% a year ago.
  • Net NPA (non-performing assets) to advances spiked to 1.19% in FY13 from 0.87% in FY12 despite higher provisioning.
  • Other income grows robust 34% YoY in 4QFY13 on the back of strengthened fee income and healthy non-interest income performance.
  • However; net profits report tepid 1.2% YoY growth for 4QFY13 on account of higher provisions and higher operating costs.
  • Capital adequacy ratio currently stands at 12.3% at the end of FY13 as per Basel II norms.
Rs (m) 4QFY12 4QFY13 Change FY12 FY13 Change
Interest income 35,859 40,681 13.4% 130,178 153,341 17.8%
Interest expense 27,519 31,373 14.0% 98,709 119,082 20.6%
Net Interest Income 8,339 9,308 11.6% 31,469 34,258 8.9%
Net interest margin (%)       2.5% 2.3%  
Other Income 4,233 5,674 34.0% 14,926 16,079 7.7%
Other Expense 4,430 5,757 30.0% 17,836 19,968 12.0%
Provisions and contingencies 3,377 4,599 36.2% 9,505 13,514 42.2%
Profit before tax 4,766 4,625 -2.9% 19,055 16,856 -11.5%
Tax 1,253 1,070 -14.6% 3,995 2,509 -37.2%
Effective tax rate 26.3% 23.1%   21.0% 14.9%  
Profit after tax/ (loss) 3,513 3,555 1.2% 15,060 14,347 -4.7%
Net profit margin (%) 9.8% 8.7%   11.6% 9.4%  
No. of shares (m)         152.9  
Book value per share (Rs)*         645.8  
P/BV (x)         0.6  

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