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.
Profits Before Tax
Profits After Tax
Provisions & Contingencies
Equity shares (m)
Operating profit margins
Tax / PBT
Net profit margins
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.
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: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407