Strong Fundamentals

Updated: May 18 2003, 05:30am hrs
Corporation Bank did well during the quarter and year to March 2003, despite Rs 13.7 crore for leave encashment and Rs 18 crore for VRS and Rs 67 crore for bad loans. This restricted the growth of net profit at 4 per cent at Rs 47.3 crore. Yet, lower interest rates and increased penetration in the retail segment lifted the operating profit margin to 26 per cent (24 per cent). Its emphasis on reasonably-priced retail deposits has helped it in bringing down cost of funds to 6.7 per cent (7.6 per cent). Income from operations/interest earned grew 9 per cent to Rs 531 crore, thanks to investments in G-Secs that led to a 23 per cent jump in income from investment at Rs 263 crore.

During 2002-03, the bank has reported a 35 per cent growth in net profit at Rs 416 crore, while gross profit increased by 21 per cent to Rs 852.5 crore. Its continued focus on retail and small/medium enterprise sectors yielded desired results in advances that grew 9.4 per cent to Rs 12,029 crore. Retail loans, that account for 20 per cent of total advances, increased to Rs 2,355 crore, while housing loans aggregated to Rs 1,460 crore. The banks deposits rose 14.7 per cent to Rs 21,724 crore, while investments were up 32.4 per cent to Rs 10,669 crore thanks to varying interest scheme (on deposits/housing loans) that had enabled the bank to garner more deposits and reduce cost of deposits.

Corporation Bank has a comfortable capital adequacy ratio (CAR) at 18.5 per cent. Its NPAs stood at 1.6 per cent (2.3 per cent). The bank has made a cash recovery of Rs 101.8 crore during the year.

It has issued notices to 119 defaulters under the new Securitisation Act for a total amount of Rs 100 crore. Of these, the bank has managed to settle dues worth Rs 17 crore through negotiations. On a consolidated basis, the banks net profit, that includes two subsidiaries Corp Bank Homes and Corp Bank Securities, stood at Rs 438 crore for the full year, while operating profit stood at Rs 900.8 crore.

Corporation Bank has already initiated steps to cash in on technology prowess of its ATM network. It plans to increase its ATM network in India to 500 in the current fiscal from the present 263 ATMs. It has entered into agreements with Oriental Bank of Commerce, Karnataka Bank and Bank of Rajasthan for sharing its ATM network. It is negotiating with Dena Bank and Allahabad Bank for similar arrangements.

The bank, as a matter of future growth policy and strategy, has decided to concentrate more on core and retail growth area rather than on volatile and bulk deposits. It has set a target of achieving 20 per cent plus growth in its business for 2003-04. Improvement in credit offtake, although spurred by retail demand, indicates industrial revival and future growth.