9 November 2016
2QFY17 Results Update | Sector: Financials
Indian Bank
BSE SENSEX
27,253
Bloomberg
Equity Shares (m)
M.Cap. (INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
8,432
INBK IN
480.3
89.5/1.3
242 / 76
6/159/74
113
17.9
CMP: INR227
TP: INR300 (+32%)
Buy
NIM expansion & trading gain aid profitability; Asset quality largely stable
Indian Bank (INBK) reported 2QFY17 PAT of INR4b (+10% YoY, 63% beat), led by
strong PPoP growth (+37% YoY and lower-than-expected credit costs (1.1%). PPoP
was aided by strong growth in other income (+34% YoY/+32% QoQ) and 17bp
sequential NIM expansion.
Slippages increased to INR9.5b (3.1% of loans, annualized) v/s INR8.2b in 1Q. GNPL
and NNPL in absolute terms was largely flat qoq and in percentage terms stood at
7.3% and 4.6% as compared to 7% and 4.5% in 1QFY17 respectively. increased
Management expects the run-rate in slippages to be similar to that in 1HFY17.
NSL (NNPL+ standard 5:25 + security receipts + S4A) increased to 6.9% of loans as
compared to 6% in 1QFY17.
Loan growth remained muted (flat both YoY and QoQ), whereas deposits was up
mere 3% yoy.
Other highlights:
(a) CASA growth was healthy at 17% YoY led by SA growth of
18% YoY; CA grew 12% YoY and reported CASA ratio stood at 33.6% as
compared to 32.1% in 1QFY17, (b) capital gains were high at INR2.6b (~50% of the
PBT), and (c) CET 1 ratio remains as one of the best in peers at 12.2%, bank is in a
growth moderation phase hence in-line with loans RWA was flat YoY
Valuation and view:
Despite muted balance-sheet growth core PPoP growth was
strong at 20% YoY driven by NIM expansion of 38bp YoY (17bp QoQ).
Furthermore, net stress loans of the bank is among the lower end as compared to
its peers. Improvement in economic growth will not only enable the bank to drive
the credit cost down but also participate in the growth (CET1 12.2%). We expect
RoE to be in double-digit. Valuations at 0.7x FY18E BV remains attractive.
Buy.
Financials & Valuation (INR b)
Y/E March
2016 2017E 2018E
NII
44.5 52.1
56.9
OP
30.3 39.0
40.6
NP
7.1 14.9
15.7
NIM (%)
2.5
2.7
2.7
EPS (INR)
14.8 30.9
32.8
EPS Gr. (%)
-29.2 108.9
5.9
BV/Sh. (INR)
281 304
330
ABV/Sh (INR)
202 221
256
RoE (%)
5.5 10.6
10.3
RoA (%)
0.4
0.7
0.7
P/E (x)
15.6
7.5
7.0
P/ BV (x)
0.82 0.76
0.70
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526
Krishnan ASV
(A.Krishnan@MotilalOswal.com);+91 22 6129 1571 /
Dhaval Gada
(Dhaval.Gada@MotilalOswal.com); +91 22
Investors are advised to refer through important disclosures made at the last page of the Research Report.
6129 1544
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Indian Bank
Exhibit 1: Quarterly Performance: Actual v/s Estimates
Y/E MARCH
Net Interest Income
% Change (Y-o-Y)
Other Income
Net Income
Operating Expenses
Operating Profit
% Change (Y-o-Y)
Other Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (Y-o-Y)
2QFY17A
12,783
18
5,846
18,629
8,567
10,062
37
4,783
5,279
1,228
4,051
10
2QFY17E
12,421
15
4,615
17,036
8,546
8,490
15
4,950
3,540
1,062
2,478
-33
Var (%)
3
27
9
0
19
-3
49
16
63
Credit costs lower than expected
Opex in line
Comments
NIM higher than estimate
Higher trading gains aids strong other income
growth
PAT beat led by strong operating performance
Source: Company, MOSL
Other highlights
PCR calculated declined 630bp YoY (+90bp QoQ) at 38.5%.
During the quarter, bank added 13 branches taking total branch network to
2,597.
Net loans and deposits were flat QoQ (flat / +3% YoY respectively). Muted loans
was mainly driven by de-growth in corporate and overseas segment. Share of
corporate loans now stands at 45.2% v/s 47.3% in 1QFY17
Absolute GNPA increased 3% QoQ; largely stable in percentage terms at 7.3%
Slippages increased sequentially to INR9.5b (3.1% annualized slippage ratio) v/s
INR8.3b (2.7%) a quarter ago. Management expects to maintain slippages within
the same range for 2HFY17.
Of the fresh slippages of INR9.5b, INR800m was an unexpected slippage from
overseas Singapore branch, INR2b was in existing NPA assets, and INR2.53b
from restructured assets.
In absolute terms, OSRL increased 2% QoQ to INR64b; Of which infrastructure
(including power) stands at INR35.2b and road constitutes INR6.4b.
CET 1 ratio continues to remain healthy at 12.2% v/s 10.37% in 2QFY16 – led by
RWA management (-1% YoY)
Indian Bank: 2QFY17 Concall Highlights
Balance Sheet related
Retail growth expected to be around 20-22%. Corporate side – credit outlook is
muted, therefore overall growth may be 5-6% on a YoY basis. If corporate
growth picks up, overall growth may increase to 9-10%
RWA growth to be in line with the growth on the credit side.
No slippages in LAP this quarter, INR490m in MSME, INR450m in agri, INR1.13b
in education.
MSME segregated into 2 parts: 1) Below INR2.5m: 20-25% of MSME loans, and
2) Above INR2.5m: ~75% of MSME loans with average ticket size ~INR10m
9 November 2016
2
 Motilal Oswal Financial Services
Indian Bank
Asset Quality related
Of the fresh slippages of INR9.50b, INR800m was slippage from overseas
Singapore branch (it was unexpected), INR2b was in existing NPA assets,
INR2.53b from restructured assets.
Large NPA of INR100m and above: slippages from these amounted to INR6b.
Fresh restructuring during the quarter amounted to INR3.49b.
Credit costs higher owing to 1) migration provision 180cr 2) extra provision
(specific) of INR150.
MSME slippages only INR500m, stress has gone up because of large
restructurings in this sector. Moreover, the denominator has reduced and
hence, as a percentage the stress appears higher.
During the quarter: 1 S4A: exposure 800m. Nothing in the pipeline.
9 accounts in SDR– all classified as NPLs. One account has been converted in
favor of the bank, and so expect recovery on this front.
Slippages to remain in the same range as in 1H.
INR19b of SR o/s. Nothing sold in this quarter
O/s 5:25: 10 accounts amounting to INR27.42b; INR18.64b classified as NPA,
rest all standard; nothing in the pipeline.
Outlook in Power: generation capacity greater than demand. With the UDAY
scheme certain bottlenecks have been removed in DISCOM
Stressed loans by sector: 68% in iron & steel, 17% in textiles, 7% in construction.
Maximum INR6-7b of power sector that may slip out of the restructured book
(in worst case scenario).
P/L related
NIM guidance: 2.7-2.75 for FY17
Tax rate for the year 25%
Guidance for employee cost – does not expect any increase in the coming
quarters; no recruitments in the current fiscal – staff rationalization taking place
in branches. IBA linked wage hike
Other expenses growth not more than 10-12% in 2H
Account sold to ARC – accounted for as provision reversal, in other income.
Others
RBIs demonetization – positive impact both in terms of money coming into the
formal channel as well as improvements in repayments by SMEs and individuals
(due to greater scrutiny).
Valuation and view
Buy with a target price of
INR300 (0.88x September
18 BV)
9 November 2016
Despite muted balance-sheet growth core PPoP growth was strong at 20% YoY
driven by NIM expansion of 38bp YoY (17bp QoQ). Furthermore, net stress loans
of the bank are among the lower end as compared to its peers.
Improvement in economic growth will not only enable the bank to drive the
credit cost down but also participate in the growth (CET1 12.2%). We expect RoE
to be in double-digit. Valuations at 0.7x FY18E BV remains attractive.
We raise our earnings estimate by ~5% for FY18E and maintain it for FY19.
Strong capitalization (CET I of 12.2% - highest amongst PSU banks) makes INBK
relatively better placed to benefit from the upturn in economic growth.
3
 Motilal Oswal Financial Services
Indian Bank
We expect RoE to move in double digit. Valuations at 0.7x FY18E BV remains
attractive.
Buy.
Exhibit 2: We raise earnings estimates by 22% in FY17 to factor in higher other income
INR B
Net Interest Income
Other Income
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
Margins (%)
Credit Cost (%)
RoA (%)
RoE (%)
Old Estimates
FY17
FY18
FY19
51.9
58.7
66.8
18.7
20.3
21.6
70.6
79.1
88.3
34.2
38.0
42.7
36.4
41.1
45.7
18.6
18.9
19.5
17.9
22.1
26.2
5.7
7.1
8.4
12.1
15.1
17.8
2.66
2.70
2.74
1.30
1.20
1.10
0.57
0.64
0.67
8.7
10.0
11.0
New Estimates
FY17 FY18 FY19
52.1 56.9 65.2
21.3 21.9 21.7
73.4 78.8 86.8
34.4 38.3 42.9
39.0 40.6 43.9
18.3 17.4 17.9
20.6 23.2 26.0
5.8
7.4
8.3
14.9 15.7 17.7
2.71 2.70 2.78
1.30 1.20 1.10
0.70 0.68 0.69
10.6 10.3 10.7
FY17
0.3
13.9
3.9
0.7
6.9
-1.4
15.6
1.2
22.4
% Change
FY18
-3.1
7.9
-0.3
0.6
-1.2
-7.9
4.6
4.6
4.6
FY19
-2.4
0.5
-1.7
0.5
-3.8
-8.0
-0.7
-0.7
-0.7
Source: Company, MOSL
Exhibit 3: One year forward P/BV
2.0
1.5
1.0
0.5
0.0
0.2
PB (x)
Median(x)
Peak(x)
Min(x)
1.7
0.8
0.8
0.7
Avg(x)
Exhibit 4: One year forward P/E
14
12
9
7
4
2
5.8
5.6
2.3
7.6
PE (x)
Median(x)
Peak(x)
Min(x)
13.3
Avg(x)
Source: Company, MOSL
Source: Company, MOSL
9 November 2016
4
 Motilal Oswal Financial Services
Indian Bank
Exhibit 5: Return ratios expected to improve led by better core operating profit and lower credit costs (%)
NII
Fee income
Core Income
Operating Expenses
Cost to Core Income Ratio
- Employee Costs
- Other Expenses
Core Operating Profit
Non Core Income
Operating Profit
Provisions
- NPA provisions
- Others
PBT
Tax
Tax rate
ROAA
Leverage (x)
ROAE
FY10
3.41
0.63
4.04
1.87
46.2
1.31
0.56
2.17
0.79
2.96
0.43
0.43
-0.01
2.54
0.86
33.9
1.68
15.3
24.9
FY11
3.62
0.67
4.29
1.73
40.3
1.19
0.53
2.56
0.39
2.95
0.59
0.64
-0.06
2.36
0.83
34.9
1.54
15.3
23.0
FY12
3.36
0.61
3.97
1.66
41.9
1.13
0.53
2.31
0.32
2.63
0.91
0.58
0.33
1.72
0.40
23.0
1.33
15.3
19.9
FY13
2.98
0.50
3.48
1.81
51.9
1.30
0.51
1.67
0.34
2.01
0.81
0.63
0.19
1.20
0.16
13.4
1.04
15.5
15.7
FY14
2.49
0.38
2.87
1.62
56.3
1.10
0.52
1.26
0.40
1.66
0.81
0.66
0.15
0.84
0.18
21.5
0.66
15.9
10.3
FY15
2.35
0.36
2.71
1.48
54.6
0.92
0.56
1.23
0.36
1.59
0.81
0.68
0.13
0.77
0.24
31.6
0.53
15.8
8.3
FY16
2.24
0.40
2.65
1.61
60.9
1.01
0.60
1.03
0.50
1.53
1.05
1.21
-0.16
0.48
0.12
25.5
0.36
15.2
5.5
FY17E
2.47
0.38
2.84
1.63
57.3
0.97
0.66
1.21
0.63
1.84
0.87
0.81
0.06
0.98
0.27
28.0
0.70
15.0
10.6
FY18E
FY19E
2.47
2.54
0.38
0.38
2.85
2.91
1.66
1.67
58.3
57.4
0.98
0.99
0.68
0.69
1.19
1.24
0.57
0.47
1.76
1.71
0.75
0.70
0.73
0.66
0.03
0.03
1.00
1.01
0.32
0.32
32.0
32.0
0.68
0.69
15.2
15.5
10.3
10.7
Source: Company, MOSL
9 November 2016
5
 Motilal Oswal Financial Services
Indian Bank
Story in charts
Exhibit 6: Loan growth remains muted
Gross loans (INR b)
YoY (%)
Exhibit 7: Deposits growth remains moderate (+3% YoY)
Deposits (INR b)
YoY (%)
18 16 16
16
14
12
11
13 14
8
8
8
4
6
5
7
3
2
1
18 18 16 17
14
8
4
3
4
13
5
8
5
1
3
Source: Company, MOSL
Source: Company, MOSL
Exhibit 8: CASA growth was robust (~17 YoY); CASA ratio
improved ~380bp YoY (%)
CASA Ratio (%)
Exhibit 9: Net interest margins continued their upward
trajectory; improved 17bp QoQ (%)
NIMs Quarterly (%)
3.1 3.1
2.9 2.9
2.6 2.6
2.5 2.4
2.7
2.5 2.5
2.5
2.4
2.3 2.4
2.3
2.6
Source: MOSL, Company
Source: MOSL, Company
Exhibit 10: Slippages remain elevated with bulk of the stress
generated by iron & steel sector
Gross slippages (INR b)
6.5
3.4
Slippage Ratio (%)
9.3
5.9
3.2
3.5
3.1 3.4
3.4
2.2
2.9
1.7 1.9
2.7 3.1
Exhibit 11: GNPA was flat QoQ; PCR ratio improved 120bp
QoQ
71
Reported PCR (%)
62 61
61 60 61 59
58 58 57 57 60 61
53 54 55
58
GNPA (%)
NNPA (%)
5.8
2.8
Source: MOSL, Company
Source: MOSL, Company
9 November 2016
6
 Motilal Oswal Financial Services
Indian Bank
Exhibit 12: Quarterly Snapshot
FY15
1Q
Profit and Loss
Interest Income
Loans
Investment
Others
Interest Expenses
Net Interest Income
Other Income
Treasury
Recovery
Others (Ex non core)
Total Income
Operating Expenses
Employee
Others
Operating Profits
Provisions
PBT
Taxes
PAT
Asset Quality
GNPA
NNPA
GNPA (%)
NNPA (%)
PCR (Calculated, %)
PCR (Reported, %)
Ratios (%)
Fees to Total Income
Cost to Core Income
Tax Rate
CASA (calculated)
Loan/Deposit
CAR
Tier I
Margins (%) - Reported
Yield on loans
Cost of Deposits
Margins
Balance Sheet (INR B)
Gross Loans
Deposits
CASA Deposits
of which Savings
Current
Loan Break Up
Agriculture
Retail
Corporate & Comm Banking
SME Credit
39,288
29,690
9,254
343
28,568
10,720
2,152
360
92
1,700
12,872
6,502
4,230
2,272
6,370
3,256
3,114
1,042
2,072
47,229
28,568
4.0
2.5
40
58
13.2
52.4
33.5
27.9
74.5
13.3
10.7
10.1
7.1
2.4
1,177
1,553
433
366
67
203
169
584
152
2Q
40,041
30,668
8,942
432
28,277
11,764
3,363
377
556
2,430
15,126
7,477
4,665
2,812
7,649
2,866
4,783
1,640
3,144
50,034
29,759
4.2
2.6
41
57
16.1
52.7
34.3
27.7
70.7
13.1
10.6
10.3
7.1
2.7
1,191
1,650
457
381
76
212
167
595
155
3Q
39,637
30,272
8,848
517
28,587
11,050
3,578
810
280
2,488
14,628
6,682
4,173
2,509
7,945
3,703
4,243
1,467
2,775
54,611
32,351
4.6
2.7
41
57
17.0
49.4
34.6
28.6
73.3
13.1
10.6
10.2
7.1
2.5
1,207
1,615
462
389
73
218
187
591
166
4Q
39,564
30,114
9,101
348
28,484
11,079
4,541
540
1,070
2,931
15,621
7,448
4,359
3,090
8,172
5,626
2,547
485
2,062
56,704
31,470
4.4
2.5
45
60
18.8
53.2
19.1
28.6
74.4
12.9
10.6
10.0
7.0
2.5
1,288
1,692
485
402
83
237
171
609
186
1Q
41,190
30,651
10,220
319
29,986
11,203
3,756
422
1,210
2,124
14,959
7,873
5,301
2,571
7,086
4,081
3,006
853
2,153
58,151
31,933
4.7
2.6
45
61
14.2
59.1
28.4
28.7
69.8
12.1
10.0
10.0
6.9
2.4
1,250
1,754
503
424
79
232
131
614
162
2Q
41,412
30,335
10,458
619
30,608
10,804
4,375
1,002
492
2,881
15,179
7,824
4,904
2,919
7,355
1,371
5,984
2,291
3,693
57,728
31,875
4.6
2.6
45
62
19.0
57.2
38.3
28.6
70.9
12.6
10.4
0.0
0.0
2.3
1,250
1,727
494
419
75
221
183
636
152
FY16
3Q
39,994
29,328
10,228
438
28,886
11,108
4,390
650
450
3,290
15,498
7,893
4,986
2,907
7,605
7,181
425
2
423
70,714
38,810
5.6
3.2
45
61
21.2
54.8
0.4
29.6
72.2
12.8
10.6
0.0
0.0
2.3
1,292
1,746
517
443
74
225
0
0
152
4Q
39,842
28,929
10,626
287
28,496
11,346
5,294
1,038
1,409
2,847
16,640
8,366
4,872
3,493
8,274
8,136
138
-707
845
88,270
54,194
6.7
4.2
39
53
17.1
58.9
-511.0
30.9
72.4
13.2
12.1
0.0
0.0
2.4
1,326
1,783
552
464
87
230
0
639
210
FY17
1Q
40,713
29,283
11,139
291
28,350
12,363
4,417
1,840
359
2,218
16,780
7,748
4,856
2,892
9,032
4,170
4,862
1,788
3,074
88,942
55,520
7.0
4.5
38
54
13.2
53.1
36.8
31.1
70.0
14.0
12.8
0.0
0.0
2.5
1,275
1,774
552
472
79
234
181
603
203
2Q
39,944
29,195
10,392
357
27,161
12,783
5,846
2,632
377
2,837
18,629
8,567
4,942
3,625
10,062
4,783
5,279
1,228
4,051
91,921
56,570
7.3
4.6
38
55
15.2
54.8
23.3
32.5
68.8
14.3
12.7
0.0
0.0
2.6
1,263
1,782
578
495
84
0
0
17
-1
0
5
5
6
0
0
38
1
3
17
18
12
Variation (%)
QoQ
YoY
-2
0
-7
23
-4
3
32
43
5
28
11
11
2
25
11
15
9
-31
32
3
2
31
14
88
122
-4
-4
-1
-42
-11
18
34
163
-23
-2
23
9
1
24
37
249
-12
-46
10
59
77
267
202
-633
-708
247
6
12
190
5
4
571
-5
-10
199
-2
30
Source: Company, MOSL
9 November 2016
7
 Motilal Oswal Financial Services
Indian Bank
Exhibit 13: Valuation metrics
Rating
66
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
IDFC Bk
FB
DCBB
JKBK
SIB
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
ANDB
Public Aggregate
Banks Aggregate
HDFC*
LICHF
IHFL
GRHF
REPCO
DEWH
Housing Finance
RECL
POWF
Infra Finance
SHTF
MMFS
BAF
MUTH
Asset Finance
NBFC Aggregate
Financials
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
CMP
Mcap
EPS (INR)
P/E (x)
BV (INR)
P/BV (x)
FY18
1.27
3.24
1.95
3.44
2.60
3.12
1.57
1.39
1.53
0.47
0.69
2.45
1.06
0.72
0.43
0.88
0.57
0.38
0.27
0.70
0.46
0.74
1.53
3.39
2.08
2.29
9.01
3.13
1.22
3.73
0.67
0.70
0.68
1.72
2.53
4.53
1.99
1.84
2.11
1.64
RoA (%)
FY17
1.12
1.92
0.56
1.63
1.77
1.83
1.18
0.79
0.95
-0.10
0.59
0.46
0.35
-0.16
0.47
0.27
0.26
0.23
0.57
0.08
FY18
1.05
1.94
0.84
1.81
1.84
1.85
1.11
0.80
0.93
0.28
0.62
RoE (%)
FY17
10.4
18.9
6.0
14.2
21.6
15.5
7.8
9.4
11.0
-1.4
10.3
FY18
10.1
19.6
9.9
15.4
23.3
17.0
9.3
10.6
11.9
4.2
11.7
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
(INR) (USDb) FY17 FY18 FY17
282
24.8 17.2 18.2 13.1
1,252
48.0 58.5 70.3 21.4
488
17.6 13.4 23.7 36.3
824
22.9 26.7 33.1 30.9
1,219
7.8
77.4 100.0 15.7
1,199
10.8 48.4 60.9 24.8
72
3.7
3.2
4.1
22.3
76
2.0
4.6
5.6
16.5
119
0.5
7.2
8.7
16.6
63
0.5
-1.8 5.6 -35.5
23
0.5
3.0
3.6
7.6
139.0
23.1
260
30.6 14.2 24.6 18.2
142
4.6
11.4 13.6 12.5
110
1.6 -10.8 21.6 -10.2
151
5.3
14.1 20.0 10.7
300
2.5
28.3 37.5 10.6
129
1.3
15.9 32.0
8.1
115
0.6
16.7 24.2
6.9
227
1.7
25.3 31.4
9.0
52
1.6
1.5
6.4
34.0
49.7
16.1
188.7
20.7
1,349
32.3 34.5 37.8 27.0
526
4.0
39.9 49.6 13.2
723
4.6
68.1 83.7 10.6
313
1.7
8.0 10.1 39.1
671
0.6
30.2 39.8 22.2
281
1.3
31.4 38.8
8.9
44.6
21.1
129
3.9
29.4 33.4
4.4
116
4.6
24.0 25.5
4.8
8.5
4.6
986
3.4
66.9 90.2 14.7
330
2.8
14.3 17.4 23.1
928
1.5
34.9 44.9 26.6
359
2.2
28.0 33.6 12.8
11.5
12.6
64.6
13.3
253.2
18.1
FY18 FY17 FY18 FY17
11.0 145 158 1.46
17.8 332 386 3.77
20.5 230 250 2.12
24.9 208 239 3.97
12.2 389 469 3.13
19.7 333 385 3.61
17.5
43
46
1.69
13.6
51
55
1.51
13.6
69
77
1.73
11.3 130 136 0.49
6.2
30
33
0.76
18.8
2.74
10.5 234 253 1.16
10.5 186 197 0.77
5.1
239 255 0.46
7.6
157 173 0.96
8.0
500 528 0.60
4.0
308 336 0.42
4.8
410 428 0.28
7.3
300 324 0.76
8.1
109 114 0.48
10.1
0.79
15.3
1.65
21.3 194 217 4.15
10.6 213 253 2.47
8.6
280 315 2.58
31.0
28
35 11.11
16.9 179 215 3.74
7.3
202 231 1.39
17.8
4.23
3.9
168 194 0.77
4.6
149 167 0.78
4.2
0.78
10.9 502 573 1.96
19.0 118 131 2.80
20.7 167 205 5.57
10.7 159 180 2.26
10.2
2.07
11.4
2.39
14.1
1.79
0.56 7.7 9.8
0.39 6.4 7.1
0.29 -4.6 8.7
0.60 9.3 12.1
0.32 5.8 7.3
0.48 5.3 9.9
0.30 4.2 5.8
0.64 8.7 10.0
0.31 1.4 5.8
1.84
1.51
3.63
2.25
2.14
1.27
1.82
1.55
3.65
2.26
2.21
1.31
19.4
20.3
25.5
31.3
18.2
17.0
19.0
21.3
28.1
32.1
20.2
17.9
2.63 2.54 18.8 18.5
2.37 2.12 16.8 16.2
2.30
1.97
3.51
3.66
2.65
2.10
3.43
3.57
14.1
12.6
23.0
18.7
16.7
14.0
24.2
19.9
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
9 November 2016
8
 Motilal Oswal Financial Services
Indian Bank
Financials and valuations
Income Statement
Y/E March
Net Interest Income
Change (%)
Non Interest Income
Net Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions (excl tax)
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Profits for Equity SH
Change (%)
Equity Dividend
Core PPP*
Change (%)
*Core PPP is (NII+Fee income-Opex)
2012
44,180
9.5
12,322
56,502
8.3
21,870
34,632
5.2
11,953
22,679
5,209
23.0
17,470
1.9
17,070
2.0
3,623
30,372
6.2
2013
45,291
2.5
12,832
58,122
2.9
27,509
30,614
-11.6
12,351
18,262
2,451
13.4
15,811
-9.5
15,446
-9.5
3,202
25,450
-16.2
2014
43,604
-3.7
13,717
57,321
-1.4
28,315
29,006
-5.3
14,249
14,757
3,167
21.5
11,589
-26.7
11,327
-26.7
2,342
22,000
-13.6
2015
44,613
2.3
13,634
58,246
1.6
28,109
30,137
3.9
15,451
14,686
4,635
31.6
10,052
-13.3
10,052
-11.3
2,017
23,355
6.2
2016
44,463
-0.3
17,814
62,277
6.9
31,955
30,322
0.6
20,768
9,554
2,439
25.5
7,115
-29.2
7,115
-29.2
720
20,506
-12.2
2017E
52,086
17.1
21,295
73,381
17.8
34,421
38,960
28.5
18,318
20,641
5,780
28.0
14,862
108.9
14,862
108.9
2,972
25,623
25.0
(INR Million)
2018E
56,887
9.2
21,930
78,817
7.4
38,251
40,567
4.1
17,413
23,154
7,409
32.0
15,745
5.9
15,745
5.9
3,149
27,390
6.9
2019E
65,159
14.5
21,679
86,838
10.2
42,911
43,927
8.3
17,926
26,001
8,320
32.0
17,681
12.3
17,681
12.3
3,536
31,877
16.4
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Deposits
Change (%)
of which CASA Dep
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
2012
4,298
99,717
108,014
1,208,038
14.2
369,078
12.8
48,729
49,411
1,414,192
88,134
379,760
903,236
20.0
16,307
26,755
1,414,192
2013
4,298
111,427
119,724
1,419,802
17.5
391,869
6.2
28,626
60,075
1,628,226
96,387
418,050
1,056,425
17.0
16,905
40,459
1,628,226
2014
4,648
134,062
138,710
1,622,748
14.3
440,605
12.4
49,639
61,165
1,872,262
104,905
468,099
1,222,090
15.7
29,322
47,846
1,872,262
2015
4,803
143,530
148,333
1,692,253
4.3
486,919
10.5
26,461
61,314
1,928,360
130,812
458,986
1,258,635
3.0
29,687
50,239
1,928,360
2016
4,803
157,795
162,598
1,782,858
5.4
557,592
14.5
35,093
56,554
2,037,104
119,993
530,893
1,290,491
2.5
35,111
60,616
2,037,104
2017E
4,803
168,194
172,997
1,907,659
7.0
636,592
14.2
43,680
64,195
2,188,530
160,441
594,600
1,329,205
3.0
37,605
66,678
2,188,530
(INR Million)
2018E
4,803
179,270
184,073
2,117,501
11.0
726,978
14.2
49,503
73,312
2,424,389
182,866
665,952
1,462,126
10.0
40,099
73,346
2,424,389
2019E
4,803
191,831
196,634
2,371,601
12.0
830,412
14.2
55,924
83,910
2,708,069
201,348
745,867
1,637,581
12.0
42,593
80,680
2,708,069
Asset Quality
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
PCR (Excl Tech. write off)
PCR (Incl Tech. Write off)
E: MOSL Estimates
18,508
11,968
2.0
1.3
35.3
70.1
35,655
23,843
3.3
2.3
33.1
60.1
45,622
27,637
3.7
2.3
39.4
57.8
56,704
31,470
4.4
2.5
44.5
56.1
88,269
54,194
6.7
4.2
38.6
53.4
94,582
57,478
6.9
4.3
39.2
55.4
88,641
50,290
5.9
3.4
43.3
61.5
(%)
82,004
43,604
4.9
2.7
46.8
67.1
9 November 2016
9
 Motilal Oswal Financial Services
Indian Bank
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expense/Int.Income
Fee Income/Net Income
Non Int. Inc./Net Income
Efficiency Ratios (%)
Cost/Income*
Empl. Cost/Op. Exps.
Busi. per Empl. (INR m)
NP per Empl. (INR lac)
* ex treasury
Asset-Liability Profile (%)
Loans/Deposit Ratio
CASA Ratio
Investment/Deposit Ratio
G-Sec/Investment Ratio
CAR
Tier 1
2012
10.1
11.4
7.7
6.7
6.6
3.4
3.6
2013
9.9
10.8
8.1
6.9
6.9
3.0
3.2
2014
9.5
10.0
8.4
7.0
7.0
2.5
2.7
2015
9.1
9.7
7.8
6.7
6.8
2.4
2.6
2016
9.0
9.4
8.4
6.7
6.6
2.3
2.5
2017E
8.4
9.0
7.5
5.8
5.8
2.6
2.7
2018E
8.2
8.9
7.3
5.6
5.6
2.6
2.7
2019E
8.1
8.7
7.3
5.4
5.4
2.7
2.8
19.8
1.3
63.9
17.5
21.8
15.6
1.0
67.4
14.9
22.1
10.3
0.7
71.4
14.7
23.9
8.3
0.5
71.9
16.2
23.4
5.5
0.4
72.6
17.9
28.6
10.6
0.7
67.7
15.5
29.0
10.3
0.7
66.9
15.8
27.8
10.7
0.7
65.6
15.8
25.0
39.5
67.9
104.4
9.3
49.2
71.8
121.6
8.4
52.9
68.0
136.9
6.0
50.2
62.0
142.8
5.0
54.0
62.8
141.5
3.3
52.6
59.2
141.5
6.7
52.9
58.9
146.3
6.8
52.4
59.0
156.2
7.3
74.8
30.6
31.4
78.3
13.5
11.1
74.4
27.6
29.4
74.5
13.1
10.9
75.3
27.2
28.8
81.4
12.6
10.2
74.4
28.8
27.1
84.2
12.9
10.6
72.4
31.3
29.8
74.4
13.2
12.1
69.7
33.4
31.2
77.0
13.2
12.1
69.0
34.3
31.4
76.3
12.8
11.7
69.0
35.0
31.4
76.3
12.3
11.3
Valuation
Book Value (INR)
Change (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Change (%)
Price-Earnings (x)
Dividend Per Share (INR)
Dividend Yield (%)
E: MOSL Estimates
ASSUMPTIONS
Deposit Growth
Loans Growth
Investments Growth
Provisions Coverage
Dividend
E: MOSL Estimates
214.9
16.5
1.1
195.4
1.2
40.6
1.9
5.7
7.5
3.2
242.9
13.0
1.0
204.1
1.1
36.8
-9.5
6.3
6.6
2.9
248.2
2.2
0.9
206.5
1.1
24.9
-32.2
9.3
4.7
2.0
261.5
5.4
0.9
215.6
1.1
20.9
-16.1
11.0
4.2
1.8
280.6
7.3
0.8
201.6
1.1
14.8
-29.2
15.6
1.5
0.6
304.4
8.5
0.8
220.6
1.0
30.9
108.9
7.5
6.2
2.7
329.5
8.3
0.7
256.2
0.9
32.8
5.9
7.0
6.6
2.8
357.7
8.6
0.6
294.2
0.8
36.8
12.3
6.3
7.4
3.2
14.2
20.0
9.2
35.3
75.0
17.5
17.0
10.1
33.1
66.0
14.3
15.7
12.0
39.4
47.0
4.3
3.0
-1.9
44.5
42.0
5.4
2.5
15.7
38.6
15.0
7.0
3.0
12.0
39.2
61.9
11.0
10.0
12.0
43.3
65.6
12.0
12.0
12.0
46.8
73.6
9 November 2016
10
 Motilal Oswal Financial Services
Indian Bank
Corporate profile: Indian Bank
Company description
Set up in 1907, Indian Bank (INBK) is a medium-
sized public sector bank. The bank made its initial
public offering in 2007. INBK is amongst the oldest
commercial banks with GoI stake of 82.1% as on
June 30, 2016. The bank has an established
presence in South India with ~60% of branches in
that region. INBK has a network of 2,584 branches
and 2,958 ATMs in India. Also, it has three foreign
branches in Singapore, Colombo and Jaffna.
Exhibit 14: Sensex rebased
Exhibit 15: Shareholding pattern (%)
Sep-16
Promoter
DII
FII
Others
82.1
8.2
6.9
2.9
Jun-16
82.1
7.6
6.5
3.8
Sep-15
82.1
9.0
5.5
3.3
Exhibit 16: Top holders
Holder Name
LIFE INSURANCE CORPORATION OF INDIA
GDFC TRUSTEE COMPANY LIMITED - A/C HDFC MID -
HSBC GLOBAL INVESTMENT FUNDS - INDIAN EQUITY
% Holding
3.1
1.9
1.6
Note: FII Includes depository receipts
Exhibit 17: Top management
Name
Mahesh Kumar Jain
Mr. V A Prasanth
Srinivasa Raghavan K
Rajagopal K
Designation
MD & CEO (addl. charge)
CFO
General Manager
General Manager
Exhibit 18: Directors
Name
Deepak D Samant
P Venkata Krishna Rao
Vinod Kumar Nagar
Sriram Ramachandran
*Independent
Name
Mahesh Kumar Jain
N Srinivasa Rao
B P Vijayendra
Exhibit 19: Auditors
Name
C K Prusty & Associates
S P Puri & Co
G Balu Associates
Deoki Bijay & Co
Padmanabhan Ramani & Ramanujam
Type
Statutory
Statutory
Statutory
Statutory
Statutory
Exhibit 20: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
30.9
32.8
Consensus
forecast
24.4
30.7
Variation
(%)
26.7
6.9
9 November 2016
11
 Motilal Oswal Financial Services
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For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures
Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412)
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Research Analysis in Hong Kong.
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Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is
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For Singapore
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Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
Varun.kumar@motilaloswal.com
Contact : (+65) 68189232
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
9 November 2016
Motilal Oswal Securities Ltd
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
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