Buy Indian Bank; target of Rs 675: Emkay Global Financial

Emkay Global Financial's research report on Indian Bank

PSBs, including Indian Bank, have seen a correction in the recent past amid concerns around slowing growth (so also banking system) and peaking RoAs. Our discussion with Indian Bank suggests that the bank’s fundamentals remain strong and it would maintain a fine balance between credit growth (~13-14%) and margins (>3.25%), underpinning its strategic focus on delivering healthy and improving RoAs (>1%). The bank has been reporting steady improvement in asset quality with GNPA ratio down to 3.8% and NNPA ratio at an industry low of 0.4%. The bank carries healthy specific PCR @90%, which should partly protect its financials from any impact of the anticipated IRACP/ECL norms, if taken through P&L. Indian Bank does not have any exposure to the beleaguered MTNL, although a few PSBs have been called to take higher hair-cuts (~60%). Given RBI’s observation on FISB nomination of Asheesh Pandey (ED at BOM) as MD & CEO of Indian Bank, the incumbent MD & CEO, S L Jain’s term has been extended till Dec-24. We hope that GoI shall take an appropriate call soon to resolve the management tangle.

Outlook

We retain BUY with an unchanged TP of Rs675/share, valuing the bank at 1.2x Sep-26E ABV.