Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Corporation Bank (CRBK.BO)
4Q11 Results: Mixed Bag with Relatively Lower Headline Numbers
4Q11 profits up a modest 11%, weaker than estimates — Corp bank's 4Q11 profits
were up a modest 11%yoy (14% below our estimates). Net interest margins were down
10bps qoq and were a key drag on earnings along with additional pension-related
costs. There were positives as well – fee income grew 57%yoy and asset quality
showed meaningful improvement with absolute NPLs down 14%QoQ. Overall, it was a
mixed quarter with lower NIMs and higher costs offset by aggressive loan growth,
robust fee growth and healthy asset quality.
P&L: Weaker margins, better fees and high credit costs — Key Highlights – a)
NIMs compression by 10bps QoQ (adjusting for accounting changes), now at 250bps,
while management guides to 3% NIMs in FY12, we believe this could be challenging
especially given its weaker deposit franchise; b) Fee income growth was robust (57%
yoy), partly supported by strong recoveries in 4Q11; c) Operating expenses contained
one-offs from pension liabilities (~Rs1.3bn) adjusting for which the increase is quite
stable at 2%yoy. We believe this should normalize at lower levels with the recurring
pension cost of Rs275mn/quarter; and d) Credit costs remained elevated at 1.3%
(annualized for 4Q11), recent aggressive loan growth can keep this under pressure.
Balance sheet: Mixed bag — a) Loan growth was aggressive at 21%QoQ and
37%YoY, mainly coming from infrastructure and corporate segments. Management has
guided to a 25%yoy loan growth for FY12, with focus on SME and retail segments. We
believe this is aggressive and could strain asset quality; b) Deposit mix remains
modest, though some traction was seen with CASA Ratio increasing from 24% to 26%
QoQ - management targets 30% CASA in FY12; C) NPLs improved significantly, partly
on the back of recoveries from slippages in 3Q, management expects further
recoveries.
Relatively weaker on funding — Corp Bank has strong profitability, a clean balance
sheet and a low operating cost structure relative to peers. However, its modest funding
franchise remains its prime weakness and could cause pain over the next few quarters.
Maintain Hold.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Corporation Bank (CRBK.BO)
4Q11 Results: Mixed Bag with Relatively Lower Headline Numbers
4Q11 profits up a modest 11%, weaker than estimates — Corp bank's 4Q11 profits
were up a modest 11%yoy (14% below our estimates). Net interest margins were down
10bps qoq and were a key drag on earnings along with additional pension-related
costs. There were positives as well – fee income grew 57%yoy and asset quality
showed meaningful improvement with absolute NPLs down 14%QoQ. Overall, it was a
mixed quarter with lower NIMs and higher costs offset by aggressive loan growth,
robust fee growth and healthy asset quality.
P&L: Weaker margins, better fees and high credit costs — Key Highlights – a)
NIMs compression by 10bps QoQ (adjusting for accounting changes), now at 250bps,
while management guides to 3% NIMs in FY12, we believe this could be challenging
especially given its weaker deposit franchise; b) Fee income growth was robust (57%
yoy), partly supported by strong recoveries in 4Q11; c) Operating expenses contained
one-offs from pension liabilities (~Rs1.3bn) adjusting for which the increase is quite
stable at 2%yoy. We believe this should normalize at lower levels with the recurring
pension cost of Rs275mn/quarter; and d) Credit costs remained elevated at 1.3%
(annualized for 4Q11), recent aggressive loan growth can keep this under pressure.
Balance sheet: Mixed bag — a) Loan growth was aggressive at 21%QoQ and
37%YoY, mainly coming from infrastructure and corporate segments. Management has
guided to a 25%yoy loan growth for FY12, with focus on SME and retail segments. We
believe this is aggressive and could strain asset quality; b) Deposit mix remains
modest, though some traction was seen with CASA Ratio increasing from 24% to 26%
QoQ - management targets 30% CASA in FY12; C) NPLs improved significantly, partly
on the back of recoveries from slippages in 3Q, management expects further
recoveries.
Relatively weaker on funding — Corp Bank has strong profitability, a clean balance
sheet and a low operating cost structure relative to peers. However, its modest funding
franchise remains its prime weakness and could cause pain over the next few quarters.
Maintain Hold.
No comments:
Post a Comment