X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Corporation Bank: Is the worst over? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 21, 2004

    Corporation Bank: Is the worst over?

    Corporation Bank, has reported dismal results for the September quarter on the back of significant rise in provisioning. While NPA provisioning in the September quarter is low, we believe most of the provisioning has been made towards depreciation in value of the company's investment (G-Sec) portfolio. Corporation Bank's bottomline has fallen by a significant 81% and topline has grown by a marginal 3% in 2QYF04 on a YoY basis, topline performance being much in line with the earlier quarters. The improvement in operating margins, however, highlights the improvement in the bank's operating efficiencies.

    (Rs m) 2QFY04 2QFY05 Change 1HFY04 1HFY05 Change
    Income from Operations 5,491 5,642 2.7% 10,865 11,169 2.8%
    Other Income 1,838 1,216 -33.8% 3,094 2,217 -28.3%
    Interest Expenses 3,020 2,763 -8.5% 6,362 5,500 -13.6%
    Net interest income 2,471 2,879 16.5% 4,503 5,669 25.9%
    Other Expenses 1,429 1,688 18.2% 2,691 3,201 19.0%
    Operating Profit 1,042 1,191 14.2% 1,813 2,468 36.1%
    Operating Profit Margin (%) 19.0% 21.1%   16.7% 22.1%  
    Provisions and Contingencies 563 2,137 279.7% 832 2,825 239.6%
    Profit before Tax 2,317 270 -88.4% 4,075 1,860 -54.4%
    Tax 868 -4 -100.5% 1,361 531 -61.0%
    Profit after Tax/(Loss) 1,449 274 -81.1% 2,714 1,329 -51.0%
    Net Profit Margin (%) 26.4% 4.9%   25.0% 11.9%  
    No. of Shares (m) 143.4 143.4   143.4 143.4  
    Diluted Earnings per share* (Rs) 40.4 7.6   37.8 18.5  
    P/E Ratio (x)         14.1  
    *(annualised)            

    What is the company’s business?
    Corporation Bank is one of the few PSU bank's in India with a clean balance sheet and impressive track record. The bank has a well-established network of 742 branches out of which 431branches and 62 extension counters are fully automated. The bank also has a network of over 700 ATMs covering nearly 80 cities and towns throughout the country. In 2001, LIC acquired 27% stake in Corporation Bank. The bank has tie-ups with LIC, New India Assurance for cross selling products and services. It has recently entered into agreements with Oriental Bank and Karnataka Bank for sharing ATMs.

    Advances growth encouraging: At the end of the September quarter the bank has seen a strong 43% rise in its advances and this is a welcome sign as the bank was struggling to show any improvement in its advances growth over the last 5-6 quarters. The bank has not provided a breakup of growth in its retail as well as non retail assets, however we believe that the growth in its advances has been mainly driven by string growth in the retail advances. However, this is nothing out of the ordinary, as almost all the banks are witnessing similar growth rates, especially in the retail segment. However despite the strong growth in advances the bank continues to witness slower topline growth, seemingly due to falling yields on both its advances as well as investment portfolios. A significant fall (17% YoY) in its investment portfolio has also led to the lackluster performance of the topline.

    NIM, one of the best in the sector
    Significant fall in cost of deposits to 4.6% from over 5.7% has led to a substantial improvement in net interest margin to over 4% from 3.6% in 2QFY04. This has also led to strong growth in net interest income and consequently operating profits and margins, this is despite the growth in operating expenses. Going forward, however, we believe that it will be difficult for Corporation Bank to further improve upon its NIM, on account of a hardening of interest rates.

    Net Profits hit by rising interest rates:
    There has been a fall in other income in 1HFY05. This is on account of a fall in treasury profits (G-Sec portfolio). Apart from that, due to the transfer of securities to the HTM (Held to Maturity) category, the bank has booked one time losses and these have been reflected in higher provisioning requirements for the September quarter. The bank had to absorb a depreciation of Rs 2.05 bn in its income statement (higher provisioning) on account of the transfer of securities to the HTM category. The profit from sale of investments, on the other hand, dropped to Rs 540 m in 1HFY05 compared to Rs 1770 m in the same period last year. Both these factors have taken a toll on the banks bottomline. Core fee based income has, however, shown a rise 35% YoY rise in 1HFY05. The net NPA to advances ratio stood at 1.7%, marginally lower compared to 1QFY05 (1.8%).

    What to expect?
    The stock is currently trading at Rs 262, at price to book ratio of 1.5 times. We believe that the bank has managed to grow its advances well in the September quarter, however it is too early to say whether this is a consistent trend. At the same time, Corporation Bank, like most other public sector banks, may have also seen the worst as far as the impact of rising interest rates are concerned (if one were to assume that there is no rapid rise in interest rates going forward). Thus going forward, improving core business fundamentals (better core interest and fee based income growth) will hold the bank in good stead.

     

     

    Equitymaster requests your view! Post a comment on "Corporation Bank: Is the worst over? ". Click here!

      
     

    More Views on News

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    Axis Bank: Outside Watchlist Slippages a Big Worry (Quarterly Results Update - Detailed)

    Jul 31, 2017

    Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.

    HDFC Bank: Asset Quality Deteriorates due to Farm Loan Waiver (Quarterly Results Update - Detailed)

    Jul 25, 2017

    Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.

    SBI: Merger Pushes up Bad Loans (Quarterly Results Update - Detailed)

    May 23, 2017

    State Bank of India (SBI) ended FY17 on a healthy note but concerns on bad loans from associate banks remain.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    CORPORATION BANK SHARE PRICE


    Aug 17, 2017 (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 - SBI COMPARISON

    Compare Company With Charts

    COMPARE CORPORATION BANK WITH

    MARKET STATS