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Last Updated : Nov 19, 2019 04:27 PM IST | Source:

Corporation Bank share price jumps 68% in 3 days after Essar Steel case resolution, CEO commentary

Corporation Bank, along with Andhra Bank, will be merged with Union Bank, which is expected to take effect from April 1, 2020.

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Corporation Bank share prices were locked in 20 percent upper circuit on November 19, taking total three consecutive days' gains to 68.5 percent after the successful resolution of Essar Steel case and positive management commentary. Undervaluation of PSU banks could also be the reason behind this rally.

The stock closed at Rs 26.45 on the BSE, with a market capitalisation of Rs 15,854.62 crore.

"We expect 40-50 bps increase in net interest margins due to recoveries. Rs 1,300 crore will go to bottomline due to recoveries this year. Total recoveries should be Rs 6,000 crore in FY20," PV Bharathi, Managing Director & CEO, Corporation Bank, told CNBC-TV18.


The bank has exposure of Rs 2,500 crore to Videocon and Rs 150 crore to Bhushan Power, she said, adding that the  total NBFC exposure was Rs 13,000 crore of which Rs 4,000 crore was at the private sector.

"We are looking to control total slippages by year-end to Rs 3,000 crore, she said.

She believes the bank's net profit should go up by Rs 2,000 crore by FY20-end and expects the net NPA at 5.3 percent. She further expects 10 percent growth in advances.

Its profit in Q2FY20 grew by 26 percent to Rs 129.8 crore YoY, but the net interest income fell by 8.5 percent YoY to Rs 1,334.4 crore, with loan growth of 4 percent while deposits grew by 9.3 percent YoY.

On the asset quality front, gross non-performing assets (NPA) at the end of September quarter declined to 15.43 percent against 15.44 percent QoQ, and the net NPA also dropped 10bps to 5.59 percent QoQ.

Meanwhile, on November 15, the Supreme Court set aside the NCLAT judgement, saying the ultimate discretion on distribution of funds would be with the Committee of Creditors (CoC) which was completely favourable to lenders. The Committee of Creditors (COC) consists of banks.

The apex court has held that it is the bank's decision to maximise the value of he corporate debtor and added that the CoC should also balance the interests of all stakeholders.

The National Company Law Tribunal (NCLT) cannot interfere with the commercial decisions taken by the CoC, SC said.

In fact, after this Essar Steel case resolution, all PSU banks remained on buyers' radar for the third straight session. On November 19, Nifty PSU Bank index gained 3.88 percent.

Corporation Bank's exposure to Essar Steel stood at Rs 1,566.60 crore, JM Financial said in its report.

"Supreme Court's notification of Essar Steel resolution is a landmark judgement. Stressed NBFC resolution framework is positive," it added.

Corporation Bank, along with Andhra Bank, will be merged with Union Bank, which is expected to take effect from April 1, 2020, said Bharathi, adding they should arrive at swap ratios by March.

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First Published on Nov 19, 2019 04:27 pm
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