Corporation Bank
BSE: 532179 | NSE: CORPBANK | ISIN: INE112A01015 | Banks - Public Sector
- Directors Report
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| Directors Report | Year End : Mar '08 |
1. The Board of Directors have pleasure in presenting the Annual
Report together with Balance Sheet and Profit and Loss Account of the
Bank for the year ended 31st March, 2008.
1.1 The Bank has put in place a well articulated frame work of 3
(People, Process, Products) to identify and execute new initiatives to
accelerate business growth on sound and sustainable lines. This
framework is also designed to improve customer engagement at all
customer touch points. Innovation is actively encouraged. People
initiatives include new programmes for leadership development,
succession planning, appointment of executive coach, incentives for
high performers, performance enhancement programmes through counsellors
etc. Process initiative include centralization of back office
functions, separation of credit marketing and approved process and feed
forward MIS to Branches. New products like Branchless Banking are
introduced to implement financial inclusion strategies. The Bank is
actively chalking out strategies to take the Bank to higher growth
trajectory.
2. Performance at a glance
2.1 The aggregate business of the Bank crossed another milestone mark
of Rs.94,000 crore during the financial year 2007-08. The total
business of the Bank increased by Rs.22,302 crore to Rs.94,610 crore at
the end of the year 2007-08, from Rs.72,307 crore, recording a growth
rate of 30.85%.
2.2 The total deposits of the Bank have grown by Rs. 13,067 crore from
Rs.42,357crore as on 31st March, 2007 to Rs.55,424 crore as on 31st
March, 2008, registering a growth rate of 30.85%.
2.3 The Bank continued its prudent approach in expanding quality credit
assets in line with its policy on Credit Risk Management. The advances
of the Bank increased by Rs.9,236 crore from Rs.29,950 crore as on 31st
March, 2007 to Rs.39,186 crore as on 31st March, 2008, registering a
growth rate of 30.83%. During the year, focused attention was given
for accelerated lending under agriculture, SSI and midsize corporate
segments for expansion of credit.
2.4 The performance of the Bank under recovery of NPAs during the year
continued to be good. During the year, the Bank effected a cash
recovery and upgradation of NPAs of Rs.315.75 crore compared to
Rs.312.69 crore in the previous year.
2.5 While the encouraging performance in different functional areas
during the year 2007-08 resulted in increased earnings in absolute
terms, the margins were under pressure and the interest spread declined
to 2.71% as on 31st March, 2008 compared to 3.08% during the previous
year.
3. Income Analysis
3.1 Interest income of the Bank recorded a growth of Rs. 1,156.08 crore
from Rs.3,360.47 crore in the year 2006-07 to Rs.4,516.55 crore
[34.40%] in the year 2007-08, as against the interest expenses which
grew by 49.74% from Rs.2,052.37 crore during the year 2006-07 to
Rs.3,073.24 crore during the year 2007-08. The Net Interest Income
recorded a growth of Rs. 135.21 crore or [+10.34%] during the same
period.
[Rs. in crore]
2006-07 2007-08
Interest Income 3360.47 4516.55
Interest Expenditure 2052.37 3073.24
Net Interest Income 1308.10 1443.31
Fees, Commission & Other 635.54 699.78
Revenue
Operating Income 1943.63 2143.09
Operating Expenses 803.59 891.95
Gross profit 1140.04 1251.14
Provisions & Contingencies 323.46 185.73
Profit before Tax 816.58 1065.41
Provision for Tax 280.44 330.42
Net Profit 536.14 734.99
3.2 The total income [total of interest income and non- interest
income] of the Bank improved to Rs.5,216.33 crore during the year
2007-08 from Rs.3,996 crore in the previous year recording a rise of
Rs.1,220.33 crore [30.54%]
3.3 Non-interest Income increased by Rs.64.24 crore [10.11%] from
Rs.635.54 crore in the financial year 2006-07 to Rs.699.78 crore in the
financial year 2007-08. The share of total Non-Interest Income to Total
Income stood at 13.42%.
3.4 The Net Income from operations [Interest Spread plus Non-interest
Income] has increased to Rs.2,143.09 crore in the financial year
2007-08 from Rs. 1,943.63 core in the financial year 2006-07 recording
a growth of 10.26%.
3.5 The Operating Expenses have shown an increase of 11% during the
financial year 2007-08 and stood at Rs.891.95 crore as compared to
Rs.803.59 crore in 2006-07.
3.6 The Cost to Income ratio (operating expenses to Net Operating
Income) marginally increased from 41.34% in the financial year 2006-07
to 41.62% in the financial year 2007-08.
4. Spread Analysis
2006-07 2007-08
Average Working Funds 42,530 53,350
Total Interest Income 3,360.47 4,516.55
Total Interest Expended 2,052.37 3,073.24
Interest Spread 1,308.10 1,443.31
Yield on Funds 7.90% 8.47%
Cost of Funds 4.83% 5.76%
Net Interest Margin 3.08% 2.71%
Growth
Absolute %
10,820 25.44%
1,156.08 34.40%
1,020.87 49.74%
135.21 10.34%
5. Gross Profit
5.1 The Gross Profit for the financial year 2007-08 stood at
Rs.1,251.14 crore as compared to Rs.1140.04 crore in the financial year
2006-07 registering an increase of Rs. 111.10 crore [9.74%].
5.2 The Asset Utilisation Ratio [percentage of Gross Profit to Average
Working Funds] stood at 2.35% in the financial year 2007-08.
6. Provisions
6.1 The Provision for Loan Losses, Provision on Standard Assets,
Taxation and others aggregated to Rs.516.15 crore in the financial year
2007-08 as compared to Rs.603.90 crore in the financial year 2006-07.
7. Net Profit and Dividend
7.1 The Bank registered a Net Profit of RsJ34.99 crore for the
financial year 2007-08 compared to Rs.536.l4 crate in the financial
year 2006-07.
Year Net Profit [Rs. in Crore]
2005-06 444.46
2006-07 536.14
2007-08 734.99
Out of the Net Profit a sum of Rs.469.18 crore was transferred to
Statutory & General Reserves and Rs.15 crore was set aside for Staff
Welfare Fund.
7.2 The Bank has already paid an interim dividend of 45% on 23.4.2008
for the year 2007-08. The Board of Directors has recommended the final
dividend of 60% for the financial year 2007-08. The total dividend for
the year 2007-08 will be 105%, which works out to Rs. 10.50 per fully
paid-up share of Rs. 10/-each.
7.3 In terms of extant guidelines, the Bank will pay the dividend
distribution tax for the financial year 2007-08. Accordingly the total
outflow on account of Dividend [inclusive of both interim and final]
for the year 2007-08 will be Rs. 176.21 crore including the dividend
distribution tax.
8. Net Worth and CRAR
8.1 The Net Worth of the Bank improved to Rs.4,229 as on 31st March
2008 from Rs.3,765 crore as on 31st March, 2007.
8.2 During the year, the Bank raised tier II Capital by way of
subordinated debts aggregating to Rs.500 crore.
8.3 The Capital to Risk Adjusted Assets Ratio [CRAR] stood at 12.09% as
on 31st Match, 2008 as against 12.76% as on 31st Match, 2007 which is
much above the norm of 9% stipulated by the Reserve Bank of India.
8.4 The tier I component of CRAR is 9.64% as on 31st March, 2008
compared to 11.30% as on 31st March, 2007.
As on
March 2007 March 2008
Tier I Capital 11.30% 9.64%
Tier ll Capital 1.46% 2.45%
Total 12.76% 12.09%
8.5 The Return on Net Worth, Earnings Per Share and Book Value per
Share for the financial year 2007-08 stood at 17.38%, Rs.51.24 and
Rs.294.79 respectively, against 14.24%, Rs.37.38 and Rs.262.51
respectively for the previous year.
9. Consolidation of Accounts
As per RBI guidelines, the Bank has consolidated the financial accounts
as at 31st March, 2008 with those of its wholly owned Subsidiary viz.,
Corp Bank Securities Ltd. As per the consolidated statement as on 31st
March, 2008, the Net Worth of the Corp Bank group stood at Rs.4,283.22
crore as compared to Rs.3,804.74 crore as at 31st March, 2007. The
consolidated Gross Profit and Net Profit for the year 2007-08 were
Rs.l,262.47crore and Rs.750.4l crore, respectively compared to Rs.
1,143.93 crore and Rs.516.19 crore, respectively for the year 2006-07.
The Bank has complied with the RBI guidelines and the Accounting
Standards prescribed by the Institute of Chartered Accountants of
India.
10. Branch Network
10.1 During the financial year 2007-08, 82 branches were added, thereby
taking the number of branches to 981 as on 31-03-2008, spread over 24
states and 2 union territories. The Bank has received licence for
opening Representative office at Dubai and Hongkong, making our
overseas presence.
11. ATMs
11.1 The Bank has 957 ATMs across the country and the continuos focus
on increasing the utilisation of ATMs.
12. Advertising and Publicity
12.1 During the year, concerted efforts were made for brand building
and the Bank continued to communicate messages on its products,
services, interest rates and the performance to the customers,
shareholders and the general public through advertisements and outdoor
publicity units.
13. Insurance & Mutual Fund Business
13.1 The Bank earned an income of Rs.7.67 crore through third party
product sales of Mutual Funds and Insurance.
13.2 Under Mutual Fund Business, the Bank mobilised Rs. 3,795 crore
business as against Rs. 512 crore during the previous year. The Bank
earned brokerage of Rs. 1.65 crore as against Rs. 0.33 crore during the
previous financial year.
14. Government Business
14.1 The total tax collection for the year ended March 2008 stood at
Rs.33,207 crore as against Rs.21,390 crore for the previous financial
year.
14.2 The Bank is authorised to collect Customs Duty in Delhi, Chennai,
Mangalore and Vishakhapatnam Commissionerates through e-payment mode.
The facility is already operationalised in Delhi and Chennai.
14.3 The Bank is authorised for Sales Tax Collection in the States of
Maharashtra, Gujarat and Delhi. The aggregate collections during the
year have crossed Rs.967 crore as compared to Rs.683 crore during the
previous financial year.
14.4 The Bank is providing exclusive banking services to BSNL in the
States of Karnataka, Maharashtra and Goa.
15. Corporate Social Responsibility-CSR
15.1 As in the previous years, the Bank took several measures during
2007-08 to fulfil its social commitment.
15.2 The Bank had launched, in its centenary year, the project of
setting up 100 village libraries. During the year 2007-08, the Bank
identified 25 villages and took steps for establishing libraries there.
With this, the total number of libraries set up by the Bank is 75.
15.3 The Bank also gave scholarship to about 50 students of identified
villages across the country as a part of the rural development
programme.
15.4 Being conscious of its corporate social responsibility, the Bank
decided to give donations to charitable institutions @ Rs.10 per SB
account and Rs.25 per Current Account opened during the campaign for
such accounts. A record number of 3.6 lakh new customers were added
during the campaign period. Accordingly, the Bank has extended
donation to nearly 50 charitable institutions working for different
under-privileged sections of the society in the country.
15.5 With a view to promote excellence among students, the Bank also
launched the CorpBank Gold Medal scheme. Under the scheme, gold medal
weighing 8 gms. would be presented to the best outgoing student of 25
reputed higher educational institutions of the country, every year.
Apart from the above, the Bank also actively associated with various
social concerns in promotion of art and culture activities.
16. Corporation Bank Self-Employment Training Institute [COBSETI]
The Corporation Bank Self-Employment Training Institute [COBSETI]
established on 22-03-1996 is a training institute sponsored by the
Bank. The institute takes care of the vocational training needs of
Chikmagalur and Kodagu districts wherein the Bank has Lead Bank
responsibility. During the training period, boarding and lodging is
provided free to the candidates. As at March, 2008, the Institute
imparted ttaining to 7180 candidates, out of which 4449 persons have
taken up self-employment ventures.
Bank has planned to establish one more COBSETI in Kodagu district.
Karnataka Government has assured to provide capital expenses of Rs.20
lakh. Upon providing suitable site by the Govt, of Karnataka, the
training institute will be established.
1.7. Corporation Bank Economic Development Foundation
The Bank, as a responsible corporate citizen continues to fulfill its
social obligations, in tune with the corporate mission, under the aegis
of Corporation Bank Economic Development Foundation (CBEDF). Financial
grants to the extent of Rs. 11.54 lakh were approved during the year
for execution of various projects. .
During the year CBEDF has also provided assistance to Neonatal
Intensive Care Unit in Lady Goschen Hospital, Mangalore and Paediatric
Intensive Care Unit at Wenlock Hospital, Mangalore, under the Save
Babies Project. Besides the CBEDF organised two workshops for
sensitising the staff of the bank and also residents of Mangalore city
on Water Conservation and Rain Water Harvesting techniques.
18. Progressive use of Official Language
18.1 During the year 2007-08, the performance of the bank under
Official Language Implementation has been quite satisfactory. The Bank
could achieve targets prescribed by the Department of Official
Language, Ministry of Home Affairs, Government of India in the Annual
Programme under various parameters. Sahsrabdi Rashtriya Rajbhasha
Shield was conferred on our Bank by Rashtriya Hindi Academy,
Roopambara. Our Bank also bagged prize under RBIs Rajbhasha Shield
Competition. The quarterly Hindi house magazine of the bank Mangala
continues to be one among the top under RBIs Inter Bank Hindi House
Magazine competition.
18.2 The Bank organised a national level seminar first of its kind at
Banks Head Office on 17.01.2008 on Role of TOLICs in changing
Scenario.
18.3 The Bank is represented in a number of committees/ working groups
constituted by various apex institutions like RBI, IBA, Govt, of India,
MHRD etc. for promoting the use of Hindi. The Bank has been
contributing under the scheme Original Book Writing in Hindi
instituted by College of Agricultural Banking, Reserve bank of India.
19. Performance of Subsidiaries and other units sponsored by the Bank
19.1 Corp Bank Securities Limited
During the year, the wholly owned subsidiary of the Bank, Corp Bank
Securities Limited (CBSL) posted Profit before tax of Rs. 11.32 crore
as against Rs.3.90 crore posted previous year and the Profit after tax
of Rs. 14.57 crore, as against the loss of Rs.20.18 crore posted
previous year. Accordingly, the Companys Net Owned Funds rose from Rs.
135.03 crore to Rs. 142.85 crore Further to the discontinuation of
Primary Dealership business activity as at the end of March 2007, the
Company ceased to be an NBFC and it started the distribution of Mutual
Fund products and earned an income of Rs.0.59 crore from it. Besides,
it has earned interest & dividend income amounting to Rs. 11.03 crore
on its investment of surplus funds. The Company would continue to
pursue various other business activities during the fiscal 2008-09,
after securing approvals from its Board and other regulatory
authorities.
19.2 Chikmagalur-Kodagu Grameena Bank [CHIKO Bank]
The Chikmagalur-Kodagu Grameena Bank [CHIKO Bank], sponsored by the
Bank has a network of 47 branches. Deposits of CHIKO Bank stood at
Rs.191.65 crore and advances at Rs.161.04 crore [gross] as on
31-03-2008. CHIKO Bank recorded a net profit of Rs.3.38 crore [before
taxation] and Rs.2.42 crore [after taxation] for the year ended
31-03-2008. Head Office and 46 branches [except one satellite branch]
have been computerized as at the end of the year. Further, the RRB
secured RBI license to open six more branches.
20. Constitution of Board of Directors
The following changes have taken place in the Board Directors of the
Bank during the year ended 31st March, 2008.
Shri Satish Goel has been nominated by the Government of India as part
time Non official Director who assumed office from 7th December, 2007
for a period of three years.
Shri K. L. Gopalakrishna,Executive Director of the Bank retired from
the services of the Bank on 31st December, 2007 on attaining
superannuation.
20.1 The Board places on record its appreciation of the guidance and
counsel received from Shri K. L. Gopalakrishna during deliberations of
the Board/Committees of the Board and also in the conduct of the Banks
business during his tenure of office as Executive Director of the Bank.
20.2 The Board also noted with pleasure that Shri. Suvarna Sanyal has
been nominated by the government of India as part time Non Official
Director for a period of three years and has joined the Board of the
Bank on 4th April, 2008. 20.3 The period of office of existing three
Shareholder Directors is going to be completed on 25-07-2008 and the
vacancies to be filled by election of Shareholder Directors,
accordingly it is also proposed to conduct the election in the ensuing
Annual General Meeting of the Bank.
21. Directors Responsibility Statements
The Directors confirm that in the preparation of the Annual Accounts
for the year ended 31st March, 2008:
21.1 The applicable accounting standards have been followed along with
proper explanation relating to material departures, if any;
21.2 The accounting policies framed in accordance with the guidelines
of the Reserve Bank of India, were consistently applied.
21.3 Reasonable and prudent judgment and estimates were made so as to
give a true and fair view of the state of affairs of the Bank at the
end of the financial year and of the profit of the Bank for the year
ended on 31st March, 2008.
21.4 Proper and sufficient care was taken for the maintenance of
adequate accounting records in accordance with the provisions of
applicable laws governing Banks in India and the accounts have been
prepared on a going concern basis.
22. Acknowledgements
22.1 The Directors thank the valued customers, shareholders,
well-wishers and correspondents of the Bank in India and abroad for
their goodwill, patronage and support.
22.2 The Directors acknowledge with gratitude the valuable and timely
advice, guidance and support received from Government of India, Reserve
Bank of India, Securities and Exchange Board of India (SEBI), Stock
Exchanges, various State Governments, Financial Institutions and the
Statutory Central Auditors of the Bank in the functioning of the Bank.
22.3 The Directors place on record their deep appreciation of the
valuable contribution of the members of the staff at all levels for the
progress of the Bank during the year and look forward to their
continued co-operation in realisation of the corporate goals in the
years ahead.
For and on behalf of the Board of Directors
Place : Mangalore (B. Sambaniurthy)
Date : 02-06-2008 Chairman & Managing Director
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