Scripscan:Corporation Bank
cmp:500
Code:532179
Story:Established in 1906, the Mangalore based Corporation Bank is one of the leading premier public sector banks in India. GOI holds 58.5% and LIC of India holds 25.5% in the bank. As a corollary of having strong investor base, the bank is endowed with credibility and long term financial support. As on Q3FY12 the bank had a network of 1431 branches and 1262 ATMs.Corporation Bank's CASA ratio has been declining since FY08 owing to higher dependence on stable bulk deposits.I expect CASA ratio to slip to 23.0% in FY12E from 26.0% in FY11.The newly setup branches should start contributing to CASA from FY13E. CASA ratio should build to 25.0% in FY13E and 27.0% FY14E.A slow 8.3% YoY growth is expected in NII for FY12E owing to higher increase in interest expenses, as a result NIMs are expected to shrink to 1.9% in FY12E from 2.2% in FY11. Moreover, cost to income (C/I) ratio for the bank is also likely to increase owing to the robust branch expansion spree that the bank is undergoing.I expect C/I ratio of the bank to increase to 39.0%, 39.3%, 39.5% in FY12E, FY13E and FY14E respectively. Higher provisions on the other hand due to worsening asset quality is also likely to affect profitability.ROAA should fall to 0.9% in FY12E from 1.1% in FY11and ROAE from 21.9% in FY11 to 19.4% in FY12E.Corporation Bank's credit grew by 28% YoY and 13% QoQ in Q3FY12. The bank expects to increase its advances portfolio by focusing towards SME, retail and priority sector lending. Corporation Bank's advances has increased by 29.4% CAGR between FY06-11, I expect a 27.2% CAGR between FY11-14E.At CMP the stock is trading at a P/ABV of 1.0x, 0.8x and 0.7x for FY12E, FY13E and FY14E respectively.
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