Buy Indian Bank :: ICICI Securities, link

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Buy Indian Bank in the range of | 189.50–184.00 for a target price of | 245.00 with a stop loss below |
163.00 on a closing basis

• Indian Bank is a PSU banks with strong 81% government holding. It has a branch network of 2380 with 1496
branches in southern states. It has grown its loan book at 19% CAGR to | 122208 crore over FY10-14. Large
corporates form 50% of loan book and retail around 14%. The bank has seen deposits growth of 17% CAGR to
| 162274 crore over FY10-14, with CASA ratio of 27.8% is fairly good for a south dominated bank
• The bank has been growing its NII by 24-25%, during FY09-11. However, in the last two years, with surging
asset quality pressure, NII has been stable at | 4400 crore in three years till FY14. GNPA for the bank has risen
to | 4562 crore (3.67% of advances) from | 1851 crore (2.03% of advances) while NNPA has also risen to
2.26% of loans from 1.33% in three years. The RA book forms 9.7% of the loan book. The bank has seen
profits growing to | 1588 crore from | 1245 crore in FY10-13 with FY14 net profit reported at | 1161 crore due
to higher NPA provisions
• Despite the asset quality pressures and rising credit cost, the bank currently has RoA and RoE of 0.7% and
10.4%, respectively. However, in the past, it used to be 1.3% and 15-17%, respectively. The current ratios are
still better than mid-sized PSU peer banks
• Also, healthy treasury income is expected due to 10 year G Sec yield correction of 25-30 bps, as AFS+HFT
book stands at 27% of SLR investments for the bank and modified duration of 2.5 years. This can boost future
profitability along with improvement in asset quality with turnaround in economy. The stock is currently
trading at 0.8x trailing FY14 P/ABV. We remain positive on the stock

LINK
http://content.icicidirect.com/mailimages/IDirect_Gladiatorstocks_Series7.pdf