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For 4QFY2011, Indian Bank reported net profit growth of 7.1% yoy to `439cr,
below our estimates of `486cr mainly on account of higher tax provisioning
(43.5% effective tax rate for 4QFY2011) than factored in by us. Further,
improvement in asset quality over the last quarter was the key positive of the
result. We recommend an Accumulate rating on the stock.
Stable margins with improving asset quality: Net advances for the bank grew
marginally by 1.8% qoq and 21.1% yoy to `75,250cr, while deposits grew by
4.7% qoq and 19.9% yoy to `1,05,804cr. CASA ratio as of 4QFY2011 stood at
30.9%, down 116bp compared to 32.0% in 3QFY2011. Reported NIM for
4QFY2011 stood at 3.86%, 2bp higher than 3.84% in 3QFY2011. During the
quarter, non-interest income grew by 9.2% qoq (down 7.3% yoy) to `272cr. The
bank’s asset quality improved during the quarter, with gross and net NPAs in
absolute terms declining by 1.6% qoq and 4.8% qoq, respectively. Gross and net
NPA ratios of the bank improved marginally by 4bp each to 0.98% and 0.53%,
respectively, with a provision coverage ratio of 84.3% including write-offs.
Outlook and valuation: The bank’s relatively higher rural and semi-urban
presence has enabled it to maintain reasonable cost of funds, resulting in more
resilient NIMs than other mid-size PSU banks. At the CMP, the stock is trading at
5.2x FY2013E EPS of `47.1 and 1.0x FY2013E ABV of `256.5, which is below
our target multiple of 1.1x FY2013 ABV. Hence, we recommend an Accumulate
rating on the stock with a target price of `269, implying a 9.0% upside from
current levels.
Investment arguments
Relatively high yield on advances, with resilient asset quality
A large part of the bank’s credit book comprises SME and mid-size corporates,
contributing relatively high yield on advances but, at the same time, maintaining
superior asset quality with net NPA ratio of less than 1%.
Technologically efficient branch franchise, moderate CASA
Indian Bank plans to open 190 branches during FY2011, indicating 10% yoy
growth, to take its total branch network to ~1,950 with 100% CBS. The bank has
moderate CASA of 30.8%, with CASA reporting a 19.4% CAGR during FY2007–10
and growing by 15.1% yoy in 4QFY2011.
Outlook and valuation
Indian Bank’s performance and strategic direction have broadly been positive and
balanced since its listing, leading to a gradual improvement in the quality of
earnings vis-à-vis its peers. Additionally, the bank’s CMD has a five-year tenure,
which provides a reasonable strategic stability to the bank. Moreover, the bank’s
predominantly rural and semi-urban presence has enabled it to maintain
reasonable cost of funds, resulting in more resilient NIMs than other mid-size PSU
banks. At the CMP, the stock is trading at 5.2x FY2013E EPS of `47.1 and 1.0x
FY2013E ABV of `256.5, which is below our target multiple of 1.1x FY2013 ABV.
Hence, we recommend an Accumulate rating on the stock with a target price of
`269, implying a 9.0% upside from current levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian Bank - 4QFY2011 Result Update
Angel Broking recommends Accumulate with a Target Price of Rs. 269.
For 4QFY2011, Indian Bank reported net profit growth of 7.1% yoy to `439cr,
below our estimates of `486cr mainly on account of higher tax provisioning
(43.5% effective tax rate for 4QFY2011) than factored in by us. Further,
improvement in asset quality over the last quarter was the key positive of the
result. We recommend an Accumulate rating on the stock.
Stable margins with improving asset quality: Net advances for the bank grew
marginally by 1.8% qoq and 21.1% yoy to `75,250cr, while deposits grew by
4.7% qoq and 19.9% yoy to `1,05,804cr. CASA ratio as of 4QFY2011 stood at
30.9%, down 116bp compared to 32.0% in 3QFY2011. Reported NIM for
4QFY2011 stood at 3.86%, 2bp higher than 3.84% in 3QFY2011. During the
quarter, non-interest income grew by 9.2% qoq (down 7.3% yoy) to `272cr. The
bank’s asset quality improved during the quarter, with gross and net NPAs in
absolute terms declining by 1.6% qoq and 4.8% qoq, respectively. Gross and net
NPA ratios of the bank improved marginally by 4bp each to 0.98% and 0.53%,
respectively, with a provision coverage ratio of 84.3% including write-offs.
Outlook and valuation: The bank’s relatively higher rural and semi-urban
presence has enabled it to maintain reasonable cost of funds, resulting in more
resilient NIMs than other mid-size PSU banks. At the CMP, the stock is trading at
5.2x FY2013E EPS of `47.1 and 1.0x FY2013E ABV of `256.5, which is below
our target multiple of 1.1x FY2013 ABV. Hence, we recommend an Accumulate
rating on the stock with a target price of `269, implying a 9.0% upside from
current levels.
Investment arguments
Relatively high yield on advances, with resilient asset quality
A large part of the bank’s credit book comprises SME and mid-size corporates,
contributing relatively high yield on advances but, at the same time, maintaining
superior asset quality with net NPA ratio of less than 1%.
Technologically efficient branch franchise, moderate CASA
Indian Bank plans to open 190 branches during FY2011, indicating 10% yoy
growth, to take its total branch network to ~1,950 with 100% CBS. The bank has
moderate CASA of 30.8%, with CASA reporting a 19.4% CAGR during FY2007–10
and growing by 15.1% yoy in 4QFY2011.
Outlook and valuation
Indian Bank’s performance and strategic direction have broadly been positive and
balanced since its listing, leading to a gradual improvement in the quality of
earnings vis-à-vis its peers. Additionally, the bank’s CMD has a five-year tenure,
which provides a reasonable strategic stability to the bank. Moreover, the bank’s
predominantly rural and semi-urban presence has enabled it to maintain
reasonable cost of funds, resulting in more resilient NIMs than other mid-size PSU
banks. At the CMP, the stock is trading at 5.2x FY2013E EPS of `47.1 and 1.0x
FY2013E ABV of `256.5, which is below our target multiple of 1.1x FY2013 ABV.
Hence, we recommend an Accumulate rating on the stock with a target price of
`269, implying a 9.0% upside from current levels.
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