Stock to buy : Corporation Bank

Corporation bank is a well managed PSU banking stock to buy. I had posted stock analysis and recommended a few months back to buy stocks of this bank if it corrects below Rs. 550 levels.

Since then stock market has corrected a lot and Corporation bank stock is not exception to this correction. Now the banking stock trades at below Rs.550 levels.

Corporation bank has 1,000-plus branches in the southern and western parts of the country. It has the reputation of being one of the best-managed public sector banks in India. It has relatively clean balance sheet compared to other banks and impressive track record.

Bank is expanding in Northern part and Tier II cities allover India. Nonperforming loans of bank are around 1% which is not much risky. Price to BV (402 in 2010, FY 2011 should be even higher) ratio at Rs.542 is 1.34 which is very good. Dividend yield at current stock price comes to be 3% which makes it a good dividend yield stock.

Must read: Should you buy stocks now at these levels?

Average return on equity ratio for bank has been 18 per cent for past three years. It is a healthy ratio. According to bank's expectations, bank is likely to post EPS growth of 14 per cent for next 2 years.

Bank has been recording very good EPS growth for past 5 years and it is expected to do so for at least next 3 years. One may buy stocks of Corporation bank if stock market corrects further and if stock is available at even lower levels. All in all, Corporation bank is one of the stocks to buy in 2011 in my list for next 2-3 years.

Also read: Stock report - Corporation Bank

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