Corporation Bank has beaten our expectations and posted a 31% jump in net profits. After encouraging earnings report from HDFC Bank, Corp. Bank became the second bank to post higher than forecasted results.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
Diluted number of shares
Diluted Earnings per share*
P/E (at current price)
The bank's interest income in the current quarter reported a double digit growth, after a dismal 5% rise in 1QFY02 topline. A 47% rise in other income further fueled the bottomline. Corp. Bank's operating margins however declined by 130 basis points. In the scenario of falling interest rates and declining lending opportunities, the bank's operating margins are likely to remain under pressure.
Corp. Bank has been successful in reducing its cost to income ratio to 36% in the current quarter from 41% in 2QFY01. Consequently, the bank's other expenses moved up by a marginal 3%. Its effective tax rate also remained at the same level (26%). However, the figure for provisions on non-performing assets jumped by 37%. This indicates the bank's asset quality has been already affected by a downturn in the industrial activity.
At the current market price of Rs 124 Corporation Bank is trading at a P/E multiple of 5 times FY02 projected earnings on Price/Book value ratio of 1x. We have projected a 20% rise in the bank's net profits in the current year. However, in light of the bank's better than expected performance in the first half of the current year, we need to revisit the numbers.
Corporation Bank is holding its analyst meet today. We will post a detailed update on the bank tomorrow, when the information on the bank's latest initiatives is available.
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: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407