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

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

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


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


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