Corporation Bank: Growth plans - Views on News from Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

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

Corporation Bank: Growth plans

Sep 7, 2001

Corporation Bank has set a target of achieving business volume of Rs 700 bn in the next five years and a compounded annual growth rate (CAGR) of 23% in net profits by 2006. However, the bank is likely to witness a squeeze in its spread due to its lending at sub-PLR rates. As on FY01, the bankís interest spread was 3.6%, which is likely to drop around 3% in the near future. The bankís prime lending rate (PLR) is at 11.5% but it is lending at 10%. The size of advances at sub-PLR rates is estimated to be around Rs 4 bn (total advances of Rs 90 bn). Consequently, the returns on the blue-chip segment are getting lower. The bankís average cost of funds is 7.5% and average return is around 11%. With a dismal growth in interest income from corporates, Corporation Bank is focusing on fee-based income and retail.

In the retail segment, the bank sees the growth opportunities in housing, car/vehicle loans, consumer durables and personal loans. It has targeted an increase of Rs 5 bn in the housing loans in FY01. The bank is expecting the total retail advances to account for about 14% of its total advances in the current year. This would help in maintaining the operating margins.

Among the other developments, Corporation Bank has issued 24 m shares to LIC at Rs 196 per share (current market price Rs 130). The bank has entered into a strategic alliance with LIC for acting as its corporate agent for marketing insurance products. After this tie-up, LICís stake in the bank has increased to 27% (from 12%) and consequently, the governmentís stake in the bank has come down to 57% (from 68%). Apart from this the bank is concentrating on its bullion business where it had earned Rs 37 m in FY01 on turnover of Rs 16 bn. It expects to achieve a turnover growth of over 80% in the precious metal trading in FY02. These recent initiatives of the bank would help in improving fee-based income.

On the costing part too, the bank aims to bring down its cost to income ratio from the current level of 39%. Its net NPA to advances ratio is also expected to drop to about 1.8% from 2% in FY01. The bank has targeted NPA recovery of about Rs 800 m in the current year (Rs 580 m in FY01) by way of one time settlement. Its gross NPAs were Rs 49.5 bn in FY01. Corporation Bankís risk management is considered to be one of the best in the industry.

At the current markets price of Rs 130, Corporation Bank is trading at a P/E of 5 times on FY02 projected earnings. The bankís Price/Book value ratio has come down to 0.8, due to a sharp fall in price from Rs 145. Attractive valuations could trigger some buying interest in the stock, as the business plans are still intact and the bank is all set to grow. Considering the past performance of the bank and its recent road map to boost business volumes, the target set by the bank is likely to be achieved.


Equitymaster requests your view! Post a comment on "Corporation Bank: Growth plans". 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.

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.

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.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

CORPORATION BANK SHARE PRICE


Mar 19, 2020 (Close)

TRACK CORPORATION BANK

  • 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

MORE ON CORPORATION BANK

CORPORATION BANK - BANK OF MAHARASHTRA COMPARISON

COMPARE CORPORATION BANK WITH

MARKET STATS