|
|
| India Infoline Research Team / 17:42 , May 07, 2012 |
|
|
|
- Corporation bank’s credit growth stood at 8.8% sequentially as against our expectation of 6.6%. The growth was driven by Retail segment (18.4% qoq), followed by Agricultural lending (10% qoq) and SME book (8% qoq). The latter two witnessed strong growth owing to the requirement of meeting bank’s PSL target. Within the retail segment, Vehicle (16.1% qoq) and Mortgage (16.6% qoq) loans were the main growth drivers. The year FY12 was marked with one of the lowest credit growth of 15.7%, compared to the previous years (FY08-FY11) where the growth was reported in the broad range of 20-40%. Going forward, the bank will focus on Retail & SME lending and within Retail, Commercial Vehicle and Gold loans will be the prime areas of focus. Deposits grew by 7.5% qoq and 16.6% yoy. CASA grew by 12.5% sequentially, ahead of the total deposits growth, thereby improving CASA ratio by 1ppt to 22.1% in Q4FY12. Strong growth in CASA was led by 27.6% sequential growth in current account balance. Bank will continue to strive towards further CASA improvement by strengthening its foothold, through branch additions, in states like Gujarat, Maharashtra, Punjab, Haryana, Orissa, Bihar, etc. Bank plans to add 300 branches during FY13.
- NIM declined by 25bps, against our expectation of 10bps fall, standing at 2.41% in Q4FY12. The sharp decline was the result of 20bps fall in YoA and 39bps increase in CoD. CoD rose steeply owing to the repricing of Term Deposits at higher rates. NIM is expected to increase in H1FY13 on account of increasing focus on high-yielding Retail and SME segments and thrust on improving CASA ratio.
- Asset quality concern seems to have abated as reflected in the slippage ratio having declined considerably (back to its normalized run rate). Delinquency ratio declined from 1.7% in Q3FY12 to 0.7% in Q4FY12. Fresh additions during the quarter stood at Rs1.6bn compared to Rs3.7bn in the previous quarter. The outstanding restructured advances were Rs46.7bn as on 31st Mar’2012. We expect asset quality to improve further in FY13 in anticipation of an improvement in the macro environment. Provisioning coverage ratio increased from 63.9% in Q3FY12 to 65.3% in Q4FY12.
- Non-interest income remained weak during the quarter. It declined by 4.2% sequentially owing to de-growth in almost all the segments, except CEB that grew by 12.3% qoq. Operating expenses declined by 7.2% sequentially, driven by a sharp reduction in the employee cost (12.6% qoq). This led to a fall in Cost/Income ratio by 140bps. The Cost/Income ratio declined from 42.2% in Q1FY12 to 35.2% in Q4FY12. It clearly indicates bank’s consistent efforts in improving its operating efficiency. RoA decreased by 20bps during the quarter owing to the weak profitability. However, we expect it to improve in FY13 anticipating an improvement in NIM and given the lean operating structure.
- Factoring in an expansion in NIM, lean operating structure and RoA improvement, we retain our BUY recommendation on the stock. However, apprehension regarding the asset quality still persists. Therefore we reduce our target price to Rs506.
Result table
(Rs m)
|
Q4 FY12
|
Q3 FY12
|
% qoq
|
Q4 FY11
|
% yoy
|
Total Interest Inc
|
35,859
|
33,628
|
6.6
|
25,554
|
40.3
|
Interest expended
|
(27,519)
|
(25,010)
|
10.0
|
(17,936)
|
53.4
|
Net Interest Inc
|
8,339
|
8,618
|
(3.2)
|
7,618
|
9.5
|
Other income
|
4,233
|
4,417
|
(4.2)
|
4,904
|
(13.7)
|
Total Income
|
12,572
|
13,035
|
(3.5)
|
12,522
|
0.4
|
Operating exp.
|
(4,430)
|
(4,775)
|
(7.2)
|
(5,056)
|
(12.4)
|
Provisions
|
(3,377)
|
(3,015)
|
12.0
|
(2,695)
|
25.3
|
PBT
|
4,765
|
5,244
|
(9.1)
|
4,771
|
(0.1)
|
Tax
|
(1,253)
|
(1,222)
|
2.5
|
(1,318)
|
(4.9)
|
Reported PAT
|
3,513
|
4,022
|
(12.7)
|
3,453
|
1.7
|
EPS
|
94.9
|
108.6
|
(12.7)
|
93.3
|
1.7
|
Key Ratios
|
Q4 FY12
|
Q3 FY12
|
chg qoq
|
Q4 FY11
|
chg yoy
|
NIM (%)
|
2.4
|
2.7
|
(0.3)
|
2.8
|
(0.4)
|
Yield on advances (%)
|
11.7
|
11.9
|
(0.2)
|
10.5
|
1.2
|
Cost of Deposits (%)
|
8.0
|
7.6
|
0.4
|
6.4
|
1.6
|
Cost of Funds (%)
|
7.2
|
6.9
|
0.3
|
-
|
7.2
|
CASA (%)
|
22.1
|
21.1
|
1.0
|
26.0
|
(3.8)
|
C/D (x)
|
0.74
|
0.73
|
0.01
|
0.74
|
(0.01)
|
Non-interest income (%)
|
33.7
|
33.9
|
(0.2)
|
39.2
|
(5.5)
|
Non-int. income/Int. exp (%)
|
15.4
|
17.7
|
(2.3)
|
27.3
|
(12.0)
|
Cost to Income (%)
|
35.2
|
36.6
|
(1.4)
|
40.4
|
(5.1)
|
Provisions/Income (%)
|
8.4
|
7.9
|
0.5
|
8.8
|
(0.4)
|
BV (Rs)
|
558.7
|
559.8
|
(1.1)
|
497.6
|
61.1
|
RoE (%)
|
17.0
|
19.4
|
(2.4)
|
-
|
17.0
|
RoA (%)
|
0.9
|
1.1
|
(0.2)
|
1.1
|
(0.2)
|
CAR (%)
|
13.0
|
12.8
|
0.2
|
14.1
|
(1.1)
|
Gross NPA (%)
|
1.3
|
1.4
|
(0.1)
|
0.9
|
0.4
|
Net NPA (%)
|
0.9
|
1.0
|
(0.1)
|
0.5
|
0.4
| Source: Company, India Infoline Research
Financial summary
Y/e 31 Mar (Rs m)
|
FY11
|
FY12
|
FY13E
|
FY14E
|
Total operating income
|
42,641
|
46,395
|
53,348
|
64,733
|
yoy growth (%)
|
25.5
|
8.8
|
15.0
|
21.3
|
Operating profit (pre-provisions)
|
26,224
|
28,560
|
32,302
|
39,899
|
Net profit
|
14,133
|
15,060
|
16,710
|
20,922
|
yoy growth (%)
|
20.2
|
6.6
|
11.0
|
25.2
|
|
|
|
|
|
EPS (Rs)
|
95.4
|
101.7
|
112.8
|
141.2
|
Adj.BVPS (Rs)
|
455.0
|
500.0
|
561.7
|
650.4
|
P/E (x)
|
4.0
|
3.8
|
3.4
|
2.7
|
P/BV (x)
|
0.8
|
0.8
|
0.7
|
0.6
|
ROE (%)
|
21.9
|
19.5
|
18.8
|
20.4
|
ROA (%)
|
1.1
|
1.0
|
0.9
|
1.0
|
CAR (%)
|
14.1
|
14.1
|
12.9
|
12.6
| Source: Company, India Infoline Research
|
|
|
|
|
|
|
|