Recommendation: Buy
CMP = Rs 253 (at the time of this recommendation)
Price target: Currently reviewing…
Key points:
- Corporation Bank reported a PAT of Rs 184.3 crore, indicating a growth of 4.1% yoy. The net interest income was Rs 378.0 crore, up by 7.2% yoy despite a healthy growth in the advances (28.3% yoy). The non-interest income provided some relief with a 32.7% growth yoy.
- The operating expenses were Rs 214.6 crore during the quarter. The expenses were contained primarily due to a 13.0% decline in staff expenses, while other operating expenses grew by 12.4% yoy. In line with the robust growth in the non-interest income and the contained growth in the expenses, the pre-provisioning profit registered a healthy growth of 16.5% yoy.
- Notably, the provisions witnessed a huge 400% jump and stood at Rs 100.8 crore – mainly because of a significant (Rs 248 crore—net of tax) marked to market loss on the bank’s investment book. The asset quality of the bank remained healthy with an improvement on absolute and relative basis. The gross non-performing assets stood at 1.46% (down 61 basis points yoy), while the net non-performing assets were down by 10 basis points to 0.36%.
- The capital adequacy ratio was healthy at 12.43% as at the end of June 2008, compared with 13.3% a year ago. The growth in advances was healthy at 28% yoy, while the deposits registered a growth of almost 26% yoy. The healthy business growth implies that the bank is again focusing on building the advances book after a muted performance in Q4FY2008, when the bank was focusing on rebalancing its advances book.
- At the current market price of Rs 253, this stock is trading at 4.5x EPS for 2009E earnings per share.
- I am currently reviewing the stock’s valuation and would report it shortly on this portal.
