Corporation Bank Core profitability under pressure ACCUMULATE :Emkay

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Corporation Bank

Core profitability under pressure

ACCUMULATE

CMP: Rs515                                        Target Price: Rs570

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n     CRPBK’s Q1FY12 NII below expectation at Rs7.1bn, however PAT at Rs3.5bn inline with market expectation led by lower tax and provisioning during the quarter

n     The NII grew by just 1.4% yoy to Rs7.1bn, led by 9.1%qoq decline in advances and more than expected contraction of 42bps in NIM’s. NIM’s stood abysmally low at 2.1%

n     Though gross NPA increased by 7.3%qoq to Rs8.5bn, fresh slippages remain under control at Rs~1.7bn for the quarter with slippage rate under <1% (annualised).

n     Bank faces headwinds on NIMs due to its low CASA but valuations unreasonable at 1.0x/0.9x FY12E/FY13 ABV with 18% RoEs. Maintain ACCUMULATE with TP of Rs570