Corporation Bank: Takeover target? - Views on News from Equitymaster

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

  • MyStocks


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

Corporation Bank: Takeover target?

Dec 15, 2000

Corporation Bank is one of the most efficient nationalized banks in India. The bank’s main focus areas include corporate lending, treasury operations, non-fund based activities and retail lending. The bank, which has a strong presence in Southern India, has a network of 650 branches across the country. Over the past three years, Corporation Bank has grown its operating income at a compounded annual growth rate (CAGR) of 25% and profits at a CAGR of 18%. Among the public sector banks it enjoys the highest operating profit margins and comparatively lower non-performing assets to advances ratio (1.8%). During the first half of the current year also it has declared excellent financial performance both in terms of growth and profit margins.

Financial Overview
(Rs m) 1HFY00 1HFY01 Change
Interest Income 7,792 8,810 13.1%
Total Income 9,080 10,118 11.4%
Operating Profit 3,285 4,147 26.3%
Other Expenses 1,319 1,559 18.2%
Depreciation 94 109 16.1%
Profits Before Tax 1,872 2,479 32.4%
Tax 444 644 44.9%
Profits After Tax 1,428 1,836 28.6%
Provisions & Contingencies 311 500 61.1%
Net Profit 1,117 1,336 19.5%
Equity shares (m) 120 120  

Key Ratios
Particulars 1HFY00 1HFY01
Operating profit margins 25.6% 32.2%
Tax / PBT 23.7% 26.0%
Net profit margins 15.7% 18.1%
EPS (Rs) 18.62 22.26

The bank has set a target of achieving a 29% growth in profits for the year ended March 2001. The higher operating profit margin is likely to drive its profits growth. Further, operational efficiencies are expected to help the bank to cushion the impact on profitability from a slow down in credit offtake. It is also expecting interest spread to rise to around 3.4% (from 2.8% in FY00).

Apart from the normal banking business, Corporation Bank is a leader in cash management services (accounted for 30% to its total profits in FY00). However its leadership position in the market is under threat from new players such as ICICI Bank and HDFC Bank coupled with other public sector banks. To minimize its risk, the bank plans to diversify its revenue streams by foraying into primary dealership, depository services and tapping domestic gold deposits. The bank has also expressed its desire to enter into the insurance sector.

During the year, the bank has earmarked Rs 560 m for its technology plans. These include aggressively tapping the retail market with e-commerce, extending Internet banking and also extending the banks cash management services on the net. The bank has plans to offer payment gateway by the year-end to facilitate Internet banking. It has recently adopted the US GAAP as a precursor to its overseas listing.

The Government's intention to bring down its stake to 33 % in all public sector banks is likely to evince interest of private sector banks for acquisition purpose. Corporation Bank’s lower NPA ratio, technology improvement and strong network of branches particularly in South could make it a likely take over target. At the current market price of Rs 88 Corporation Bank is trading at a P/E multiple of 3.5 times its FY01 projected earnings and a Price/Book value ratio of 0.8 times.

Equitymaster requests your view! Post a comment on "Corporation Bank: Takeover target?". Click here!


More Views on News

Union Bank of India Swings to Profit as Asset Quality Improves (Views On News)

Jun 8, 2021

Union Bank's share price up 2% post March quarter earnings.

PNB Reports Profit in March Quarter After Three-Way Amalgamation (Views On News)

Jun 8, 2021

Shares of PNB fell over 2% yesterday despite healthy quarterly results.

Bank of Baroda Shares Plunge 5% After Reporting Huge Loss (Views On News)

May 31, 2021

The stock fell after the bank posted a loss due to higher tax expenses.

India's Largest Bank, SBI Posts Record Profit in Q4 (Views On News)

May 22, 2021

All you need to know about the bank's latest financial results.

How Did Canara Bank Perform in Q4FY21? (Views On News)

May 19, 2021

Key takeaways from Canara Bank Q4FY21 results.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Mar 19, 2020 (Close)


  • 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