Accumulate Indian Bank; target of Rs 74: Dolat Capital

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26 Aug, 2025 12:21

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Indian bank reported NII and PPoP growth of 17% and 23% YoY respectively on an amalgamated basis, driven by lower slippages, higher treasury gains and lower other opex. Moratorium levels for TLs at 20% as of July-end based on one unpaid monthly instalment looks superior compared with peers. Based on two unpaid installments, the ratio stands at 7%. Despite the 160 bps erosion in CET1 ratio owing to the amalgamation with Allahabad bank, bank's CET1 ratio at 10.3% as of 1QFY20 remains the best amongst PSBs. With low capital consumption (RWA/assets at 52%), the bank is not in need of any urgent capital raise in our view. The bank's healthy capital usage has historically aided its performance. Additionally, PCR at 68% is comforting and capital erosion has been less relative to other recent PSB mergers. Nonetheless, modest operating metrics (PPoP/assets at 1.8%) and low provision buffers (0.2% of advances) could limit RoAs.

We value the bank at 0.6x P/ABV, implying a TP of Rs74 against a RoA/RoE of 0.5%/9% for FY22E with an ACCUMULATE recommendation. The stock currently trades at 0.5x FY22E P/ABV.

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