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South based Corporation Bank (CRPBK IN) is a mid sized state owned government
bank (GoI holding 58.5%) with a network of 1362 branches and balance sheet size
of Rs 1.4trillion. Having its dominant presence in Southern parts of India with
more than 50% branches, bank is trying to diversify its geographical distribution by
adding 150 branches in FY12 particularly in Western and Northern parts; has added
206 branches in FY11. We like Corporation Bank due to its aggressive branch
addition, enjoying best asset quality in class & robust business mix growth. With
all the banks facing interest rate pressure, NIMs of the bank will also be under
pressure in FY12 which has been factored in its current price.
At CMP of 415, the bank is trading at an attractive valuation of 0.7x FY13E ABV. We
initiate coverage on Corporation bank with “BUY” rating with a price target of Rs
601 (i.e. discounting FY13E by 1.0x, an upside of 45% from current levels).
Key Highlights
Robust business mix growth: CRPBK has been very aggressive in growing its business
mix with advances growing by 30% CAGR over FY08‐11 way above industry levels.
Although, trend doesn’t seems to continue in FY12 due to rising interest rate regime.
Thus, we have assumed 22% YoY growth in its advances in FY12E which we assume
as lowest assumption looking at the last five years growth in advances. Currently,
bank has crossed its business mix of Rs 2trillion and going forward it is expected to be
at Rs 2.5 trillion in FY12E.
Aggressive branch addition to continue in FY12: In comparison with its peer group,
bank has added highest number of 206 branches in FY11. Currently, it has around
1362branches and is expected to add another 150 branches against management
guidance of 200 branches in FY12E which will be used to draw CASA in the longer
run.
Asset Quality best in class: Gross NPAs of the bank stood at 1.1% which is considered
to be best in class as compared to its peers. However, it is expected to rise marginally
to 1.2% in FY12 due to slowdown in the economy.
Superior return ratios demand Valuation: CRPBK has been consistent in delivering
strong RoANW and RoAA above 20% and 1% respectively in last two years. In FY11,
RoE and RoA stood at 21.9% and 1.1% respectively reflecting its strong performance
in the bottom line. However, we expect decline in both RoANW and RoA in FY12 to
19.1% and 0.9% due to higher interest cost impacting bottom line which will improve
back in FY13 to 21.3% and 1% respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
South based Corporation Bank (CRPBK IN) is a mid sized state owned government
bank (GoI holding 58.5%) with a network of 1362 branches and balance sheet size
of Rs 1.4trillion. Having its dominant presence in Southern parts of India with
more than 50% branches, bank is trying to diversify its geographical distribution by
adding 150 branches in FY12 particularly in Western and Northern parts; has added
206 branches in FY11. We like Corporation Bank due to its aggressive branch
addition, enjoying best asset quality in class & robust business mix growth. With
all the banks facing interest rate pressure, NIMs of the bank will also be under
pressure in FY12 which has been factored in its current price.
At CMP of 415, the bank is trading at an attractive valuation of 0.7x FY13E ABV. We
initiate coverage on Corporation bank with “BUY” rating with a price target of Rs
601 (i.e. discounting FY13E by 1.0x, an upside of 45% from current levels).
Key Highlights
Robust business mix growth: CRPBK has been very aggressive in growing its business
mix with advances growing by 30% CAGR over FY08‐11 way above industry levels.
Although, trend doesn’t seems to continue in FY12 due to rising interest rate regime.
Thus, we have assumed 22% YoY growth in its advances in FY12E which we assume
as lowest assumption looking at the last five years growth in advances. Currently,
bank has crossed its business mix of Rs 2trillion and going forward it is expected to be
at Rs 2.5 trillion in FY12E.
Aggressive branch addition to continue in FY12: In comparison with its peer group,
bank has added highest number of 206 branches in FY11. Currently, it has around
1362branches and is expected to add another 150 branches against management
guidance of 200 branches in FY12E which will be used to draw CASA in the longer
run.
Asset Quality best in class: Gross NPAs of the bank stood at 1.1% which is considered
to be best in class as compared to its peers. However, it is expected to rise marginally
to 1.2% in FY12 due to slowdown in the economy.
Superior return ratios demand Valuation: CRPBK has been consistent in delivering
strong RoANW and RoAA above 20% and 1% respectively in last two years. In FY11,
RoE and RoA stood at 21.9% and 1.1% respectively reflecting its strong performance
in the bottom line. However, we expect decline in both RoANW and RoA in FY12 to
19.1% and 0.9% due to higher interest cost impacting bottom line which will improve
back in FY13 to 21.3% and 1% respectively.
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