Corporation Bank

CMP: Rs. 338 Industry: Banking

Stock Info
Market Capital Rs :4988 cr Equity Capital Rs :143.44 cr Avg Trading Vol :131611(Qtly) 52 WK High/Low :485/211 Face Value : Rs 10 BSE Group :A
BSE Code :532179 NSE Symbol :CORPBANK Bloomberg :CRPBK IN
Reuters :CRBK.BO BSE Sensex :18092 NSE Nifty :5281

Shareholding Pattern (As on 31st Dec, 2007)
Promoters :57% Domestic Institutions :30% Foreign Institutions :10%
Corporate :0.5% Public & Others :2%

Result Highlights

The bank managed to give a faded result with around only 6% growth in NII and Operating income. However due to lower hit of provision the bank registered a 30% growth in net profit at Rs. 190 cr. We believe that in case the bank executes its planned strategies well, it might get well paid for its reasonable big size and the proven operating efficiency in the past.

Sliding Margin – NIM of the bank came down by 23 bps on a YoY basis to 2.74%. Though the bank improved its yield on advances from 9% in March 07 to 10.27% in Q308, the high cost deposit garnered during the beginning of 2007, at about 300 bps more than the average cost, took its toll on the margins. These deposits will mature only in the beginning of next fiscal year. Some of the impact was also due to the income on temporary surplus funds parked in investments which have been recorded as other income and not interest income.

Other Income – The core fee income for the first nine months increased by a mere 10% while the overall other income increased by a little above 6%. Not so active treasury business resulted in a flat trading income when compared to many other banks. The bank which once cornered a majority share of the Cash Management Services has seen a substantial decline due to fierce competition. It plans to revive the same with some active steps like outsourcing and opening of new centers in Tier II cities. The bank also plans to concentrate on cross selling activities with plans to outsource the sales activity.

Business growth – Over first nine months loan grew by 19% to Rs 34,458 cr while in the absolute terms the incremental QoQ growth in the third quarter was only 6%. This indicates the general slowdown of credit off take in the economy. Deposit increased by 24% and the CD ratio slid from 72.3% in the last quarter to 70.3% in Q308.

Asset health –The asset quality of the bank appeared comfortable with net NPA down to 0.33% against 0.47% in the corresponding quarter last year. The bank has been able to bring down the gross NPA to 1.71% from 2.13% last year, without making any prudential provision. The bank is well covered at 81% of provision coverage.

Company Sketch:

Corporation Bank is a 101 year-old PSU bank set in the south Indian city of Mangalore. Government holds 57% of the equity capital of the bank. Out of the remaining 43%, 26% is held by LIC, the largest insurance company. Bank’s future vision for the sector is cashless transaction in urban areas and branchless banking in rural areas through local agents.
As on December 2007 the bank had 949 branches, 33 extension counters and 941 ATM’s. It is amongst one of the most tech savvy PSU banks and has implemented CBS since 2000. It is
compact bank with an efficient use of manpower which is one of the main reasons for its low operating cost.

Other Key Takeaways From Analyst Meet

• Plans to opens new branches in South West and NCR region. 100 more high growth potential centres identifiedplanned for 2008
• Set up new format financial centre’s on a pilot basis called “ Invest Mart"
• Keen on improving EPS and ROA
• Training conducted for different business segments by the professors from IIM and MDI and employees of big banks like SBI
• Aims to achieve a Rs 1000 cr business
• Plan to focus on SME sector for credit
• Immediate goal is to improve CASA mix by concentrating on payroll accounts and youth
• More than 1 million new accounts opened on an YOY basis as against average 5 / 6 lakhs per year in the last 3 years
• Online trading of equity using the Internet Banking channel. Tie-up with various Broking firms like IL&FS, ShareKhan, UTI Securities, Reliance Money & Religare