In 2QFY19 Indian bank’s total advances grew at a healthy 19.5% YoY (in line with CSEC estimate of 20.3%) to INR 1.72tn. The domestic loan book grew by 19.6% YoY (4.5% QoQ), driven by growth in RAM (Retail Agricultural and MSME) segment, which was up by 24.6% YoY (6.3% QoQ). Corporate & Commercial segment also saw a growth of 13.2% YoY. Management has guided loan book growth of ~20% in FY19E, driven entirely by the RAM segment. Overall deposits recorded moderate growth of 10.5% YoY (beating CSEC estimate of 7.7%) and stood at INR 2.2tn, led by strong growth in term deposits (12.4% YoY). CASA however, grew at slower pace of 7.3% ( flat QoQ). While Savings grew by 8.5% YoY, demand deposits demonstrated muted growth (1.6% YoY). Consequently, CASA ratio declined to 36.1% vs 37.2% in 2QFY18.
OutlookThough slippages were higher this quarter, which limited the expansion in margins (due to interest reversal), we gain comfort from healthy cash recoveries and >60% provision coverage. Hence, we maintain a BUY rating with a revised target price of INR 304, assigning a P/ABV of 0.9X FY20E.
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