9 November 2016
2QFY17 Results Update | Sector: Financials
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
242 / 76
TP: INR300 (+32%)
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.
(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.
Financials & Valuation (INR b)
2016 2017E 2018E
EPS Gr. (%)
P/ BV (x)
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526
(A.Krishnan@MotilalOswal.com);+91 22 6129 1571 /
(Dhaval.Gada@MotilalOswal.com); +91 22
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.