Corporation Bank- Aggressive growth hurts NIMs : ACCUMULATE :: Emkay

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Corporation Bank

Aggressive growth hurts NIMs

ACCUMULATE

CMP: Rs 583                                       Target Price: Rs 700

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n     CRPBK’s Q4FY11 NII/PAT at Rs7.6bn/Rs3.5bn below expectation led by more than expected contraction in NIM’s

n     The bank provided Rs1.3bn for pension liability including Rs743mn for retired employees in Q4FY11. Second pension option liability revised upwards to Rs6.3bn from 5.5bn earlier.

n     Slippage rate moderated during the quarter to 0.2% from 0.4% in the preceding quarter

n     Bank faces headwinds on NIMs due to its low CASA but valuations unreasonable at 1.1x/1.0x FY12E/FY13 ABV with 22% RoEs. Downgrade to ACCUMULATE with TP of Rs700