Indian Bank - Better among south-based PSU banks…ICICI Securities

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Buy Indian Bank :: ICICI Securities, link

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Technicals- TRF, Indian Bank, Ingersoll Rand, OnMobile, MCX, BGR Energy Systems :: Business Line

Sizzling Stocks: Gitanjali Gems, Indian Bank :: Business Line

Angel Broking - Indian Bank - RU4QFY2012- Result Updates - PDF link

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Indian Bank - RU4QFY2012

Sizzling Stocks: Indian Bank ,Rallis India :: Business Line,

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Sizzling Stocks: Indian Bank (Rs 179.6)

The stock was in a medium-term downtrend, in place since this February peak of Rs 253. This trend accelerated last week and the stock slumped 8.5 per cent on Friday following its disappointing fourth quarter numbers.

For the week, the stock has tumbled 14 per cent with good volumes. But it is testing a key long-term support band between Rs 170 and Rs 180. Its daily indicators and oscillators are hovering in the oversold territory. The stock has breached the daily Bollinger bands' lower boundary implying oversold.

An upward reversal from the aforesaid support band can push the stock higher to Rs 195 and to Rs 210 in the short-term. A strong rally above Rs 225 is needed to alter its downtrend and take the stock higher to Rs 245.

On the other hand, an emphatic breakthrough of the Rs 170 support will strengthen the stock's downtrend and pave the way for a medium-term decline to Rs 154 and then to Rs 142.

Rallis India (Rs 124.9)

The stock gained 10.5 per cent in the previous week. It is currently testing its intermediate-term down trendline that has been in place from October 2011 peak of Rs 185 and a key resistance around Rs 130. Breach of this resistance will take the stock higher to Rs 140 which is a significant long-term resistance.

Next important resistances are positioned at Rs 150 and Rs 160. Only a conclusive breakthrough of Rs 160 will alter the downtrend and push the stock northwards to

Rs 180. The inability to surpass the resistance level of Rs 140 will confine the stock to trading broadly between Rs 115 and Rs 140. However, a fall below Rs 115 can drag the stock lower to Rs 103. Subsequent support for the stock is at Rs 94.

Investment Focus - Indian Bank: Buy ::Business Line

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Indian Bank: Ex-exceptionals, In line : Centrum

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Ex-exceptionals, In line
INBK’s Q3FY12 performance was in line excluding the reversal of deferred tax
provision (Rs523mn). Overall, a stable quarter with healthy NIMs (3.5%),
stabilising slippages (1.8%) and decent loan growth (19%). At 1.0x FY13E
Adjusted BPS, the stock is attractively priced considering strong return ratios
(RoA of ~1.3%, RoE of ~20%+) and asset quality position better than peers.
We maintain Buy.
􀂁 Mixed asset quality trends: Asset quality trends were mixed during Q3FY12
as GNPA increased by 14% QoQ even as slippage rate was stable at 1.8% and
write-offs were a tad higher. A major part of the incremental slippages came
from the SME segment. Meanwhile, restructured loans grew by just 9% QoQ
to Rs56bn (6.3% of loans) led by telecom exposure. Slippages in restructured
assets at ~6% are lowest among PSB peers. Provision coverage ratio remains
healthy at 76.5 %. We maintain our view that the restructured assets are likely
to rise in quarters ahead led by stressed sectors (infrastructure, SEBs etc).
􀂁 NIM contracts QoQ: Reported NIMs of 3.6% reflects a contraction of ~20bps
QoQ led by lower yields on advances sequentially (could be reversal of interest
income). Although, the calculated NIM is largely stable QoQ. The loan book
grew by 19% YoY to Rs880bn led by agriculture loans (26% YoY) large
corporate segment (20% YoY) while the management seems to be turning
cautious on SME segment (8% YoY).

Earnings Update - Indian Bank:: Tax reversal comes to the rescue:: CSEC Research

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Tax reversal comes to the rescue

Indian Bank’s revenues and operating profit were along expected lines. PAT, however, was higher than expected; led by tax reversal. PAT was up 7%YoY at Rs 5.26bn. Net interest income continued to drive operating profits; non-interest income also chipped in with a 13.1%YoY growth.

Quarterly Highlights

·      Credit growth stumbles, alternate credit (investments) up ~50% 

·      CASA stable at about 25%

·      Asset quality healthy, net NPLs at 0.8%

·      Margins under pressure

·      Net interest income up 12.8%YoY

·      Operating profits growth curbed at 12.3%YoY

Valuation

At current levels the stock trades at 0.97X FY13E adjusted book value (standalone) and 4.08X FY13E EPS (standalone). Buoyed by superior net interest margins and aided by a higher leverage on equity, Indian Bank enjoys a laudable return on equity in the PSU space. We expect the bank to be among the outperformers in the PSU banking space. With valuation having run up we rate the stock aMARKETPERFORMER on the stock with a target price of Rs 256. Key risks include a less than expected loan book expansion and a significant variation in spreads.

Regards,

CSEC Research

Indian Bank Raise PO on 2Q earnings beat and positive risk return 􀂄 BofA Merrill Lynch,

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Indian Bank
Raise PO on 2Q earnings beat
and positive risk return
􀂄 Raise PO to Rs260 on positive risk-return
We raise our PO to Rs260 factoring in +6% 2Q earnings beat driven by topline
surprise. We have also raised earnings by only +4/3% for FY12/13 (earnings
growth at +14/18% in FY12/13), as we normalize credit costs at +70bps (vs.
50bps reported). Risk-return remains positive, with stock trading at +1.1-1.2x
FY12E book / 1.0x FY13E book, with RoEs of still +20/21%, resp. We believe
Indian Bk can trade up to ~1.2x FY13E book owing to healthy return ratios. Our
target multiple is still at a +15% discount to Gordon multiples owing to low stock
liquidity (Govt. owns 80% of stock) and higher exposures to riskier sectors (~20%
of loans to Infra; +4% to textiles).
2Q: +6% beat (adj. earnings) on topline surprise
Indian Bank reported earnings of Rs4.7bn, 13% yoy growth (+15% headline beat)
driven by topline surprise and in part, also owing to int. on IT refund of Rs400mn
(incl. in other income). Adjusted for this, earnings beat of +6%. Topline grew 16%
yoy driven by 24% yoy loan growth and flat margins (up 33bps qoq). Other
income (core) was up +6% yoy. CASA down ~250bps yoy and 75bps qoq to 30%.
Capital remains very healthy, with Tier 1 at ~11% (total at 13.3%).
Asset quality manageable, despite higher qoq slippages
Slippages for Indian Bk increased by +125% qoq (to Rs3.8bn). However, almost
+40-50% of this rise qoq was driven by ~3 corporate / SME a/c’s (Dye unit, Steel
unit and a Hotel), which the mgmt believes will be upgraded in the subsequent
quarters. Owing to higher slippages, headline gross NPLs are up 30% qoq (at
1.2%) and net up 42% (at 0.7%). But provision cover stands healthy at +79%. We
estimate slippages at +Rs11.5bn for FY12 and credit costs at ~75bps.

Indian Bank: Few one-offs drive NPLs upwards :: Kotak Sec

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Indian Bank (INBK)
Banks/Financial Institutions
Few one-offs drive NPLs upwards. Indian Bank’s earnings growth of 13% yoy was
driven by healthy revenue growth (NIM expansion and strong non-interest income).
However, slippages were marginally higher-than-trend levels primarily due to few lumpy
SME loans. Post the transition, slippages have been around comfortable levels of 1.5%,
which is impressive. Valuations are attractive at 1X FY2012E book and 5X EPS for RoEs
at 19-20% levels. Maintain BUY with TP of `300.

Indian Bank: Strong asset quality was the key hallmark for the quarter:: Kotak Sec

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Indian Bank (INBK)
Banks/Financial Institutions
Strong asset quality was the key hallmark for the quarter. Indian Bank’s 1QFY12
earnings of `4.1 bn were driven by lower provisions as slippages were lower at 1%
levels. Post the transition exercise on reporting NPLs in 1QFY11, slippages have been
within comfortable levels of 1.0-1.5%, which is impressive. While margins declined by
40 bps qoq – it still remains comfortable at 3.4% levels. Valuations are attractive at 1X
FY2012E book and 6X EPS for RoEs at 20% levels. Maintain BUY with TP of `300.


Post transition slippages are at 1.5% levels; maintain BUY
It have been four quarters since Indian Bank moved reporting NPLs without any manual
intervention and slippages post this transition have been impressive though marginally above its
own trend levels. Since 2QFY11 slippages are easing, having declined from 1.9% levels to 0.9%
currently, impressive when compared to peers. NIMs, despite having declined by 40 bps qoq, are
healthy at 3.4% levels. Also, the bank is now growing in line with industry average as against
30% levels till 3QFY11 despite slippages trends being at extremely comfortable levels. We believe
that the bank is inexpensive at current levels of 1X FY2012E book and 5X EPS for its strong RoAs
of 1.3% levels and RoEs of over 20%. We factor a slower loan growth of 18% CAGR for FY2011-
13E along with 30 bps decline in margins. We maintain our BUY rating with TP of `300.
Growth in line with industry average; CASA ratio declines 100 bps qoq to 31%
Indian Bank’s loans grew in line with industry average at 21% yoy qoq, slowing down the pace of
growth from 30% yoy levels reported since December 2011. Sequential growth was higher at 9%
qoq but we believe that this could be due to one-off opportunities as the bulk of the loan growth
in the current quarter has been in the large corporate segment. Retail, SME and agriculture loans
grew by 10-12% yoy, a cautious and positive approach in this environment and high cost of
deposits. Deposits grew by 21% yoy (2% qoq) with CASA ratio stable qoq at 31% levels.
Slippages below 1% levels - first time since December 2009
For the first time since December 2009, slippages declined below 1% in the current quarter
despite gross and net NPLs increasing qoq. Excluding any large slippages that could distort
analysis, trends in the past four quarters post the transition have not seen any sharp volatility –
though it remains higher than what the bank reported in previous years.
Gross NPLs increased 9% qoq to `8.1 bn (1% of loans) while net NPL increased 7% qoq `4.2 bn
(0.5% of loans). Provision coverage ratio was about 49% (including write-off was flat qoq at 84%)
compared to 47% in March 2011. Loan loss provisions were lower at 70 bps (annualized) as the
bank made additional provisions to meet regulatory guidelines on NPLs/restructured loans.

Indian Bank — Cut PO, but risk-return positive, Maintain Buy :: BofA Merrill Lynch,

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Indian Bank — Cut PO, but risk-return positive,
Maintain Buy
Country Overview
1Q: Reported profit only 2% below, but PPOP miss by 15%
Indian Bank reported earnings of Rs4.1bn, 11% yoy growth and only 2% below
estimates, but PPOP earnings were 15% below estimates, driven by a 6% miss
on topline and +25% below estimates other income. Topline grew 14% yoy,
driven by ~21% yoy loan growth, but margins declined by ~30 bps yoy (+40bps
qoq) to 3.4%. CASA too declined by +200bps yoy, but was flattish qoq at 31%.
Other income missed by +25% and was down +34% yoy.
Asset quality remains manageable
Indian Bank’s headline gross NPLs are up 9% qoq (at 1%) and net up 6% (at
0.5%). Provision cover for the bank stands healthy at +84%, probably amongst
the highest across banks. Moreover, slippages have declined to Rs1.6bn vs.
~Rs2.5bn over last few quarters. We estimate slippages at Rs9.5bn (flat yoy).
Cut earnings by ~11/13%; growth at +16/21%
We have lowered our earnings est. by ~11/13% for FY12/13 to factor in added
margin pressure and cut loan growth est. owing to persistent macro headwinds.
We now estimate earnings growth of +16/21% for FY12/13.
Cut PO to Rs285, but risk-return still positive
We cut our PO to Rs285 factoring in earnings cut and macro headwinds. But we
maintain our Buy, as risk-return remains positive, with stock trading at +1.2-1.3x
FY12 book / 1.0x FY13 book, with RoEs of still +20/22%, resp. We believe Indian
Bk can trade up to +1.2-1.3x FY13 book owing to healthy return ratios (RoAs of
1.5% and RoEs of +20/22% for FY12/13. Our target multiple is still at a +15%
discount to Gordon multiples owing to low stock liquidity (Govt. owns 80% of
stock).

INDIAN BANK -Reported strong earnings, led by sturdy margins and lower pension provisions :: Kotak Securities

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INDIAN BANK
7 RECOMMENDATION: BUY
TARGET PRICE: RS.320
FY12E P/E: 5.1X, P/ABV: 1.2X
Q4FY11 Results: NII and Net profit came ahead of expectation on
back of strong margins and lower pension provisions. Asset quality
remained stable with healthy PCR (84.3%; including tech w/o).
Reiterate BUY.
q Indian bank reported strong earnings - NII grew 21.8% on back of strong
margins (3.86% in Q4FY11) & healthy loan growth (20.9% YoY). Margin
came ahead of our expectation as yield on assets rose by 59 bps (QoQ) as
against only 30 bps rise in cost of deposits. Lower pension provisions
further aided the net profit growth (7.0% YoY to Rs.4.4 bn), which again
came above our expectations.
q Although bank revised its pension liability to Rs.9.62 bn (>3x its earlier
estimate of Rs.2.94 bn till Q3FY11), opex came below our expectations
(C/D ratio at 34.7% in Q4FY11). It has also provided Rs.1.48 bn towards
retired employee deficit, in line with recent regulatory guidance.
q Asset quality has remained stable with gross and net NPA at 0.98% and
0.53%, respectively. NPA coverage ratio is also at comfortable level
(84.3% including technical w/o).
q We have slightly tweaked our earnings estimate for FY12E and maintain
BUY on the stock with target price of Rs.320. At target price, stock will
trade at 1.5x of its FY12E adjusted book value.

Indian Bank: Strong margins and lower pension provisions drive better earnings :: Kotak Securities

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Indian Bank (INBK)
Banks/Financial Institutions
Strong margins and lower pension provisions drive better earnings. Indian Bank’s
4QFY11 earnings of `4.4 bn, were sharply higher than our estimates on the back of
stable margins and lower provisions for employees. Retirement benefit charges, the key
overhang, were revised upwards but their impact on earnings was lower as the bank
released excess provisions made in earlier periods. Asset quality trends are stable.
Valuations are attractive at 1.1X FY2012 book and 6X EPS. BUY with a TP of `350.

Indian Bank - 4QFY2011 Result Update Angel Broking recommends Accumulate with a Target Price of Rs. 269.

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 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.

Indian Bank - Result Reviews ; Angel Broking,

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Indian Bank
For 4QFY2011, Indian Bank registered net profit growth of 7.0% yoy to `439cr; however,
on a sequential basis, net profit declined by 10.7%. The result was below our estimate of
`486cr mainly on account of higher tax provisioning (43.5% effective tax rate for
4QFY2011) than factored in by us. Net interest income (NII) grew by 18.9% yoy, slightly
above our estimates. Net advances for the bank grew marginally by 1.8% qoq and 20.1%
yoy to `75,250cr, while deposits grew by 4.7% qoq and strong 24.0% yoy to `1,05,804cr.
Non-interest income grew by 9.2% qoq, but came in lower by 7.3% on a yoy basis, to
`272cr. Operating expenses remained muted sequentially, but increased by 35.2% on a
yoy basis, to `480cr. Cost-to-income ratio improved to 34.7% in 4QFY2011 from 36.9%
in 3QFY2011.

The bank’s asset quality also showed improvement 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 (83.0% in 3QFY2011).
At the CMP, the stock is trading at 0.9x FY2012E ABV. We maintain our Buy
recommendation on the stock with a target price of `269. We may revise our estimates
post interaction with the management.

INDIAN BANK -Quality at Compelling Valuations :Sunidhi Research

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Best in class NIMs coupled with sound asset quality led to superior ROAs
Indian Bank’s loan book is skewed towards high yielding segments such as SME, retail and agriculture, which form about 43% of the banks advances. As a result, despite having a moderate CASA ratio of 32%, the bank’s NIMs are the highest amongst its peer set at around 3.7% as compared to ~3.1% for its peers. Best in class NIMs coupled with sound asset quality and cost efficiencies has led to superior ROAs for the bank. Indian Bank’s ROA at 1.7% for FY10 is one of the highest in the industry.
Loan book to grow at CAGR of 20% for FY11-13
Indian Bank has displayed a robust loan book growth in the past, with advances expanding by a CAGR of 27.6% from FY05 to FY10 as compared to a systemic CAGR of 24.6% for the same period. Going ahead we expect loan growth to moderate from current levels based on a slowdown in general bank lending to infrastructure, telecom, and microfinance sectors. Despite moderation, the advance book expansion is expected to remain strong, at around 20% CAGR for FY11-13.
Adequately capitalized to fund growth
The bank is adequately capitalized with a CRAR of 12.4% and a Tier 1 CAR of 9.7%. The bank has further headroom to raise ` 50720 mn of Tier II capital to fund future growth.
Asset quality concerns overdone
Despite its focus on riskier, high yielding assets, the bank’s asset quality is sound. This can be attributed to its strong relationships with its clients as well as its prudent attitude towards asset quality. With the shift towards system based recognition of NPAs, the asset quality of Indian Bank witnessed a setback with slippages spiking to 5.1% in Q1FY11. In the last two quarters, however slippages have moderated and stood at 1.4% for Q3FY11. Going ahead we expect asset quality to improve on the back of system recognition of NPAs which would lead to better monitoring and control.
Outlook &Valuation
Given Indian Banks superior ROAs, best in class NIMs, sound asset quality and strong loan book growth, we believe it should trade at a premium to its peer group. At a CMP of ` 213, the bank is available at compelling valuations, marginally below its long term average one year forward P/ABV multiple (rolling basis) of 1.1x and at a 55% discount to its historical high valuation. We initiate coverage on Indian Bank with a BUY rating and a price target of ` 310 (1.4x FY12E ABV).

INDIAN BANK: Kotak Sec: global investor conference 2011

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INDIAN BANK: Key takeaways
􀁠 Expects to sustain margins at 3.5-3.8% and does not expect much pressure on margins in
the near term. Willing to slow down growth if deposit costs rise further without
commensurate lending rate increases.
􀁠 Asset quality trends are comfortable. Expects net NPLs to be at 0.5% by March 2011
(currently at 0.6%) and has a target of 0% by March 2012. While the management has
kept this internal target, they will be comfortable if NPLs remain between 0-0.5% on net
basis. Recovery trends remain healthy.
􀁠 The bank had reported pension / gratuity costs of just Rs2.8 bn during 3Q results.
However, the management is now of the view that the actual estimates will be more than
2X of this amount and might have to take a larger hit during 4Q.

ADD Indian Bank: target price of Rs 320: Kotak Sec

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Indian Bank (INBK)
Banks/Financial Institutions
Margins stable; NPL decline on sell down and lower slippages. 3QFY11 numbers
were higher than our estimates on the back of lower operating expenses and
provisions. Margins were stable for the quarter at 3.8%. The decline in gross NPL was
driven by a loan sell-down to ARCIL and lower slippages. The lower cost for retirement
benefits comes as a surprise but we expect a revision in 4QFY11. Valuations are
attractive at 1.1X FY2012 PBR and 5X PER. Maintain ADD with a target price of `320.