Corporation Bank Moves Higher On Improved Asset Quality

Corporation Bank, a mid-sized public sector bank, has announced its Q4FY13 results. Contrary to the general trend seen among public sector banks, Corporation Bank has seen it asset quality improving on a sequential basis, while maintaining the topline growth rate.

The bank's net interest income (NII) for the quarter ended March 31, 2013 increased by 11.61% to Rs 930.78 crore on a yearly basis. In the same period, the bank’s Other Income has increased by 34% to Rs 567.4 crore. This rise was probably due to the higher recoveries.

The asset quality has also improved on a sequential basis at the gross as well as net levels. The Gross NPAs of the bank have come down from 2.18% at the end of Q3FY13 to 1.72% in the recently concluded quarter.  In the same period, its Net NPAs were down to 1.19% from 1.63%. The bank has also increased its Provision Coverage Ratio (PCR) by 4%, which led to the provisions increasing by 13% on a sequential basis.

All this pulled up the net profit of the bank marginally by 1% on a yearly basis to Rs 355.5 crore.

The results show that Corporation Bank was adequately capitalised for the year ended March 31, 2013, and is showed a Capital Adequacy Ratio (CAR) of 12.41% according to the Basel II norms.

The board of directors has announced a dividend of Rs 19 per share, which gives a dividend yield of 5% at its CMP. The shares of the bank are currently discounting its book value at 0.7x. Considering its current performance and the higher dividend yield, investors can look at entering the counter.