Corporation Bank: 4Q net down 18% - Views on News from Equitymaster

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Corporation Bank: 4Q net down 18%

Jun 6, 2001

Corporation Bank's fourth quarter profits dropped by 18% due to a significant reduction in operating margins and higher provisioning for NPAs.

(Rs m)FY00FY01Change4QFY004QFY01Change
Interest Income 16,044 18,045 12.5% 4,230 4,716 11.5%
Other Income 2,708 2,921 7.9% 841 921 9.5%
Interest Expenditure 11,461 12,232 6.7% 2,857 3,307 15.7%
Operating Profit (EBDIT) 4,583 5,813 26.8% 1,373 1,409 2.6%
Operating Profit Margin (%)28.6%32.2%32.5%29.9%
Other Expenditure 3,040 3,414 12.3% 898 949 5.7%
Profit before Tax4,2515,32125.1%1,3161,3814.9%
Provisions & Contingencies 873 1,351 54.8% 389 546 40.4%
Tax 1,054 1,352 28.2% 377 382 1.2%
Profit after Tax/(Loss) 2,325 2,618 12.6% 550 453 -17.6%
Net profit margin (%)14.5%14.5%13.0%9.6%
No. of Shares (eoy) 120 120 120 120
Diluted Earnings per share*19.421.818.315.1
P/E (at current price)6.3
*(annualised)

The bank's interest income continued to grow in double digits and on an aggregate was up 13% for FY01. However, higher cost of funds depressed margins. This has resulted in a marginal 3% growth in operating profits in the fourth quarter. On a year on year basis OPM rose by 360 basis points.

A 55% rise in provision amount for FY01, resulted in a slow growth in profits at 13%. Higher provision could be due to adverse industry and capital market scenario in the last fiscal.

At the current market price of Rs 138 Corporation Bank is trading at a P/E of 6x FY01 earnings and a Price/Book value ratio of 1.2x.

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