Stocks

Broker's call: Indian Bank (Buy)

| Updated on October 29, 2020 Published on October 30, 2020

Chola Securities

Indian Bank (Buy)

Target: ₹68

CMP: ₹58.20

In Q2-FY21 Indian Bank’s total advances increased by 3.3 per cent y-o-y ₹3.3 lakh crore. The domestic loan book increased by 1.7 per cent y-o-y, buoyed by growth in agriculture segment, up by 6.5 per cent y-o-y while MSME segment advances increased by 5.1 per cent y-o-y.

The overall deposits increased by 7 per cent and stood at ₹ 5 lakh crore, led by growth in CASA. Indian Bank traditionally enjoys a higher CASA ratio than peers. Post amalgamation with Allahabad Bank, the CASA ratio further improved to 42.2 per cent in Q1-FY21 and has remained flat sequentially in Q2-FY21.

During the quarter, the net interest income (NII) saw a growth of 32.1 per cent y-o-y (+7.1 per cent q-o-q) and stood at ₹ 4,100 crore, owing to credit growth and improvement in NIM to 3.06 per cent. Asset quality improved despite a challenging macro environment on account of Supreme Court’s stay on NPA labelling and large write-offs,.

Despite the uncertainties surrounding credit costs and a weak credit off take, the Bank with its strong capital base remains well placed to benefit from anticipated economic revival in the coming festive season. The moderating fresh slippages and improving GNPAs present a stable outlook for the bank. We arrive at a target price of ₹68, thereby upgrading our rating to a Buy (earlier: outperformer).

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Published on October 30, 2020
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