>Corporation Bank (INDIABULLS)

CORPORATION BANK - HOLD
Result Review

* Slowing Down: Corporation Bank’s operating profit grew by 61.9% yoy, driven by a 43.2% rise in the NII and a 69% rise in other income. However, comparing on a like-to-like basis, without the MTM gains, the operating profit grew by 31% yoy. Despite healthy numbers, the impact of the business-cycle downturn has been evident in a moderate advances growth (3.2% sequentially), and a 75% yoy rise in delinquencies for 9M FY09. In view of the ongoing economic downturn, we retain our conservative estimates for margins, but downward-revise those for credit quality and business-growth. This tempers our fair-value estimate to Rs.182. While, we do believe that Corp Bank’s stock price reflects these concerns, we see limited upside in current environment. Therefore, we downgrade our rating to Hold.

* Advances growth to remain moderate: We expect CorpBank’s advances growth to average ~18% and ~16% for FY09 and FY10 respectively. This downward revision in our growth estimates is based on funding and delinquency concerns. Funding concerns stem from a below average growth in deposits (2.7% qoq) and delinquency concerns emerge from the advances-mix. The Bank’s advances-mix is dominated by large industries (30.6%), retail (20%), SMEs (10.4%) and agriculture (9.2%), which are likely to face near-term headwinds. Therefore, the Bank’s credit off-take is likely to remain moderate.

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