Corporation Bank: Net Profits Dip In Q3FY13

Corporation Bank, a mid-sized public sector bank, has came out with its Q3FY13 results on February 1, 2013. The numbers were disappointing, as the net profit of the bank saw a deep cut, falling by 25% on a yearly basis. Post the announcement, the scrip fell by 6.21% and closed at Rs 28.35. The reason for such a lacklustre performance was the fall in its net interest income as well as an increase in the total expenditure.

The bank’s net interest income saw muted growth, up by merely 2% on a yearly basis to Rs 883 crore, whereas its total expenditure (including the interest expenditure) increased by 17% to Rs 3498 crore.  The provisions of the bank also increased by almost 50% on a YoY to Rs 406 crore.

As regards the segmental revenue, Corporation Bank’s Treasury operations saw subdued growth of just 2%, while Corporate Banking and retail banking were up by 16% and 17% respectively. However, all the three segments saw a drop on the profits front.

The asset quality of the bank also deteriorated at the gross as well as net levels. On a yearly basis, the Gross NPA increased by 83 basis points and the Net NPA rose by 67 points.

The capital adequacy of the bank according to the Basel II norms stood at 12.57% as at the end of December 2012.
Corporation Bank’s stock is currently trading at a Price-to-Book value of less than 1x, which looks cheaper as compared to its other peers. However, based on the results, we advise investors to stay away from the scrip as of now.