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Corp Bank: Asset quality weakens further - Views on News from Equitymaster

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Corp Bank: Asset quality weakens further
Dec 31, 2015

Corporation Bank declared its results for the second quarter (2QFY16) and the financial year 2015-2016. The bank has reported a 18% YoY growth in net interest income and a 17.5% YoY growth in net profits. Here is our analysis of the results.

Performance summary

  • Interest income grew by a mere 1.3% YoY in 2QFY16 and 1.5% YoY in 1HFY16 on a subdued 4.8% YoY growth in advances.
  • Net interest margin (NIM) registered a significant improvement of 0.3% for 2QFY16 and 0.2% for 1HFY16 on the back of a fall in interest expenses.
  • Growth in other income was robust at 49.4% YoY for 2QFY16 and 28% for 1HFY16.
  • Net NPA (non-performing assets) to advances rose to 3.5% in 2QFY16 from 2.9% in 2QFY14.
  • Backed by controlled rise in operating expenses and provisions, net margin expanded by 0.6% during 2QFY16. For 1HFY16, the net margin was flat at 4% due to a faster rise in provisions.
  • Capital adequacy ratio currently stands at 11.9 % at the end of September 2015 quarter as per Basel III norms.
Rs (m) 2QFY15 2QFY16 Change 1HFY15 1HFY16 Change
Interest income 49,401 50,029 1.3% 97,935 99,357 1.5%
Interest expense 39,570 38,416 -2.9% 78,662 76,937 -2.2%
Net Interest Income 9,831 11,613 18.1% 19,273 22,420 16.3%
Net interest margin (%) 2.00% 2.29%   1.96% 2.21%  
Other Income 2,889 4,317 49.4% 6,505 8,336 28.1%
Other Expense 6,341 7,305 15.2% 12,424 14,045 13.1%
Provisions and contingencies 5,204 5,638 8.3% 9,793 11,852 21.0%
Profit before tax 1,176 2,988 154.1% 3,562 4,859 36.4%
Tax -429 1,102   -357 930  
Effective tax rate -36.5% 36.9%   -10.0% 19.1%  
Profit after tax/ (loss) 1,605 1,886 17.5% 3,920 3,929 0.2%
Net profit margin (%) 3.2% 3.8%   4.0% 4.0%  
No. of shares (m)         994.3  
Book value per share (Rs)*         124.9  
P/BV (x)         0.3  

* (Book value as on 30th September 2015)

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