Buy Indian Bank; target of Rs 275: Unicon Investment

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Buy Indian Bank; target of Rs 275: Unicon Investment

Unicon Investment is bullish on Indian Bank and has recommended buy rating on the stock with a target of Rs 275 in its November 1, 2011 research report.

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Unicon Investment is bullish on Indian Bank and has recommended buy rating on the stock with a target of Rs 275 in its November 1, 2011 research report.

"Indian bank (INBK) net profit grew by 12.7% YoY to INR 4.6 Bn (much above our expectations of INR 4 bn). Net interest income grew by 15.4% to INR 11.3 bn on YoY basis & non-interest income grew by 21% to INR 3.4 bn. The muted performance was due to higher interest expenses of INR 18.9 bn (47% YoY growth). INBK's cost to income ratio increased to 37.7% against 41.7% in Q2FY11. The Bank's Balance Sheet grew by 20.6% to INR 2.02 tn in Q2FY12, as the deposits registered a growth of 18.6% along with advances growing by 23.4% on YoY basis. However, Current and Savings Account (CASA) ratio declined to 29.8% in Q2FY12 from 32.24% in Q2FY11. Loan book grew due to higher growth in Overseas Credit, Corporate & Commercial & Agriculture advances to INR 45 bn, INR 465 bn & INR 127 bn (46%, 30% & 24% YoY growth) respectively."

"During the quarter, the GNPA fell on YoY basis to 1.21% from 1.29% in Q2FY11, however on sequential basis it increased by 30 bps. Also, NPAs on YoY basis fell to 0.69% from 0.73% in Q2FY12, but on the sequential basis it increased by 13 bps. The sequential rise in NPAs is due to identification of NPAs through CBS since June 2010. The provision coverage ratio, including technical write-offs, stood at 79.35%. The bank's capital adequacy ratio for Q2FY12 was 12.23% with Tier I at 9.89% & bank opened 32 branches in Q2FY12."

"Indian Bank's loan book is skewed towards high yielding segments such as SME, retail and agriculture, which form about ~43% of the banks advances. As a result, despite having a moderate CASA ratio of ~30%, the bank's NIMs are the highest amongst its peer set at around 3.7% as compared to ~3.1% for its peers. Best in class NIMs coupled with sound asset quality and cost efficiencies has led to superior ROAs for the bank ~1.7%. Management's strategy of moderating growth with focus on margins & asset quality would be positive for the bank from long term perspective. We have BUY rating on the stock for target price of INR 275, says Unicon Investment research report.

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To read the full report click on the attachment