Corporation Bank's operating margins in the 2QFY01 improved sharply to 35.3% due to reshuffling of high cost deposits. As a result the bank's operating profits jumped by 46% to Rs 1.5 bn. During the quarter saving bank deposits accounted for 28% of total deposits and the bank has also reduced the cost of deposits to 8% (from 8.5% as on March 2000). Investment portfolio of the bank has been classified according to RBI guidelines. As a consequence the bank has saved Rs 15 m (net of tax) on account of provision for depreciation in the value of investments.
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 advances during the 1HFY01 increased by 21% and deposits grew by 9%. It has also achieved higher credit to deposit ratio of 54% compared to 49% in 1HFY00. The bank expects to achieve the growth of 19% in deposits and 22% in advances for the year ended March 2001.
Corporation Bank has reduced its NPA ratio to 1.8% (from 1.9% in FY00). Also it has the healthy capital adequacy ratio (CAR) of 13.3%. Adequate CAR will allow the bank to foray in insurance without any equity dilution. It has planned to invest around Rs 500 m in insurance venture. However, the exact game plan is not yet finalised.
In order to reduce the operating expenses the bank is continuously investing in technology improvement. Out of 650 branches it has already computerised 311 branches, covering around 78% of its total business. It is planning to computerise 50 more branches by March 2001 and will invest around Rs 650 m for the purpose. Although, the bank has large network of branches it has only 5 ATMs. It has planned to install 50 ATMs by the year end, which will cost the bank around Rs 40 m.
Avg. business / employee
Avg. business / branch
Profit / employee
Yet another achievement of the bank is maintaining its income from cash management services despite competition. During the 1HFY01 income from CMS improved by 12.5% to Rs 348 m. It has added 49 new clients taking the total clienteles to over 900 companies.
At the current market price of Rs 67 Corporation Bank is trading at a P/E multiple of 3 times its 2QFY01 annualised earnings on Price/Book value ratio of 0.6 times. The bank's valuations are lower than other private sector and public sector banks. Its initiatives in improving the technology and maintaining the current growth rate is expected to re-rate its valuations in time to come.
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