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Chola Securities
Indian Bank (OP)
Target: ₹69
CMP:₹63.45
In the first quarterly earnings post-merger with Allahabad bank, Indian bank’s total advances increased by 5.5 per cent y-o-y to ₹3.3 lakh crore. The domestic loan book increased by 5.7 per cent y-o-y, buoyed by growth in retail segment, up by 10.9 per cent y-o-y while corporate segment advances increased by 6 per cent
The Overall deposits increased by eight per cent and stood at ₹4.8 lakh crore, led by growth in savings and time deposits . Indian Bank traditionally enjoyed a higher CASA ratio than peers. Post amalgamation with Allahabad Bank the CASA ratio further improved to 42.2 per cent in Q1-FY21. For the combined entity this quarter CASA registered an increase of 11 per cent to ₹2 lakh crore.
Asset quality improved despite a challenging macro environment on account of standstill asset classification due to moratorium period. Therefore resulting in moderate slippage of 0.64 per cent (annualised) vs 2.47 per cent in Q1-FY20. \
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. Assigning a P/ABV of 0.43x FY22E, we arrive at a target price of ₹69, thereby downgrading our rating to Ourperformer (earlier: Buy).
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