Buy Corporation Bank – Target 805

Posted by admin

September 13, 2011

CMP: Rs 439
Target: Rs 805

Corporation Bank is one of the leading south-based bank with a business size of above Rs 1.9 trillion. The GOI holds 58.5 per cent stake while the other major shareholder LIC holds 25.5 per cent stake. Corp Bank has managed to grow at a decent pace in the past few years and maintained a high quality asset profile. However, in light of challenging credit off-take conditions and considering the steep sequential slide in its NIMs during Q1FY12, we have reduced our business and NII growth estimates. The Bank currently trades at an attractive valuation of 0.8x FY13E ABV & 4.1x FY13E Earnings. We believe the stock can trade at 1.4x P/ABV given its sustainable 20 per cent ROE. We maintain ‘Buy’ with a revised price target of Rs 805.

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