29 October 2021
2QFY22 Results Update | Sector: Financials
Indian Bank
Buy
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
INBK IN
1,245
217.1 / 2.9
195 / 57
33/33/144
614
CMP: INR174
TP: INR200 (+15%)
Modest operating performance; asset quality stable
Credit cost likely to stay elevated; sharp increase in restructured book
Financials & Valuations (INR b)
FY21 FY22E
Y/E March
156.7 166.1
NII
114.0 133.4
OP
30.0
43.5
NP
2.8
2.7
NIM (%)
EPS (INR)
26.6
36.7
92.3
37.8
EPS Gr. (%)
312.1 329.0
BV/Sh. (INR)
234.1 262.3
ABV/Sh. (INR)
Ratios
9.8
12.3
RoE (%)
0.5
0.7
RoA (%)
Valuations
6.6
4.8
P/E(X)
0.6
0.5
P/BV (X)
0.7
0.7
P/ABV (X)
Shareholding pattern (%)
As On
Sep-21 Jun-21
Promoter
79.9
79.9
DII
10.5
10.4
FII
2.4
3.0
Others
7.2
6.7
FII Includes depository receipts
FY23E
178.6
145.7
47.6
2.7
38.3
4.4
364.3
298.9
11.7
0.7
4.6
0.5
0.6
INBK reported a mixed 2QFY22, with weak NII and elevated provisions
affecting PBT growth. However, net tax reversals aided earnings beat. On
the other hand, asset quality trends were largely stable.
Total recovery from the DHFL resolution stood at INR6.1b, which was
mainly utilized towards creating provisions on one large corporate account
(SREI Infra). On the business front, loan growth was impacted on account of
a decline in the Corporate portfolio (5% YoY decline), with a strong
sequential recovery in the Retail and MSME segment.
Asset quality held stable even as slippages came in elevated (~4.4%
annualized), led by higher recoveries/upgradations (~INR25.3b) and write-
offs (~INR23b), with GNPA/NNPA ratio declining by 13bp/21bp sequentially.
Restructuring book increased to 5.8% of loans. The high SMA book, at 6.4%,
would keep asset quality under check.
We expect a RoA/RoE of 0.8%/13% by FY23E. We maintain our
Buy
rating.
Sep-20
88.1
3.9
0.8
7.2
PPOP grew 11% YoY, slippages remain elevated, PCR improves to 68%
INBK reported a PAT of INR10.9b (+164% YoY), supported by tax reversals of
INR3.6b. PBT grew 2.5% YoY (32% miss) to INR7.3b. NII declined by 1.5%
YoY to INR40.8b, affected by higher interest reversal of INR3.2b and
subdued loan growth. Domestic NIM stood at 2.89%.
Core fee income declined by 8% YoY, while total other income grew 26%
YoY (+8% QoQ) to ~INR19.7b, led by a recovery in bad debts and a rise in
forex income.
OPEX was broadly flat YoY (~16% QoQ) ~INR27.7b. This includes an INR3b
impact from provisions made towards family pension and NPS. C/I ratio
increased to 45.9% (v/s 41.3% in 1QFY22). PPOP grew 11% YoY (in line) to
INR32.7b.
On the business front, loan growth stood ~INR3.6t (up 6% YoY, but down
1% QoQ), led by a decline in the Corporate portfolio (-5% YoY), while the
Retail (+14% YoY), MSME (+8% YoY) and Agri (+16% YoY) book continued to
show healthy trends. Deposits grew ~10% YoY (up +2% QoQ), led by 11%
YoY increase in term deposits. CASA deposits grew by 8.5% YoY. Domestic
CASA mix stood at 41.4% (+50bp QoQ).
On the asset quality front, slippages stood elevated at INR39.5b (~4.4%
annualized), led by Corporate, which includes an INR18.2b slippage from
SREI Infra on which 50% provisions have been maintained. However, higher
recoveries/upgradations of INR25b and write-offs of INR23b supported
asset quality, with GNPA/NNPA ratio declining by 13bp/21bp sequentially to
9.56%/3.26%. PCR improved further to 68.1% (v/s 66.5% in 1QFY22).
Nitin Aggarwal - Research Analyst
(Nitin.Aggarwal@MotilalOswal.com)
Research Analyst: Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com) |
Yash Agarwal
(Yash.Agarwal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.