Accumulate Indian Bank; target Rs 227: Angel Broking

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Accumulate Indian Bank; target Rs 227: Angel Broking

Angel Broking is bullish on Indian Bank and has recommended accumulate rating on the stock with a target price of Rs 227 in its November 3, 2011 research report.

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Angel Broking is bullish on  Indian Bank and has recommended accumulate rating on the stock with a target price of Rs 227 in its November 3, 2011 research report.

"Indian Bank reported a healthy set of numbers for 2QFY2012. The bank's net profit grew by 12.7% yoy to Rs 469cr, above our estimates, partly due to Rs 40cr of non-recurring interest income on income tax refund (classified under other income) and higher recoveries than estimated by us."

"Net advances grew by 3.9% qoq and 23.5% yoy to Rs 85,765cr and deposits grew by 5.2% qoq and 18.6% yoy to Rs 116,218cr. CASA deposits growth was moderate at 1.2% qoq (9.5% yoy) to Rs 34,617cr, leading to 120bp sequential decline in CASA ratio to 29.8%. The bank's yield on advances improved by 94bp qoq to 12.1%, leading to a sequential increase of 33bp in reported NIM to 3.8%. Non-interest income increased by 20.7% yoy (up a strong 37.3% qoq) to Rs 342cr. Treasury income was lower at Rs 21cr, registering a sequential decline of 55.3%. The bank classified interest income of Rs 40cr received on account of income tax refund under non-interest income in 2QFY2012. Removing its effect, core fee income excluding treasury grew by 6.6% yoy (up strong 38.9% qoq). Recoveries picked up and more than doubled during the quarter, although on low base, to Rs 40cr. The bank had already switched over to system-based NPA recognition in FY2011, however still slippages more than doubled sequentially to Rs 380cr, primarily on account of three large accounts becoming non-performing during the quarter. Consequently, gross NPA ratio weakened to 1.2% (1.0% in 1QFY2012) and net NPA ratio weakened to 0.7% (0.5% in 1QFY2012). Management is guiding for a quarterly run rate of Rs 200cr-250cr in slippages going forward."

"The bank's relatively higher rural and semi-urban presence has enabled it to maintain reasonable cost of funds, resulting in more resilient NIMs than other mid-size PSU banks. At the CMP, the stock is trading at 0.85x FY2013E ABV, which is below our target multiple of 0.9x FY2013 ABV. Hence, we recommend an Accumulate rating on the stock with a target price of Rs 227, implying a 5.5% upside from current levels," says Angel Broking research report.

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