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

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Better among south-based PSU banks…
We recently met the management of Indian Bank to get a better insight
into its current business and its future growth plans. The business of the
bank has grown at a CAGR of 17.4% over FY10-14 to | 286634 crore.
Deposits stood at | 162275 crore (16% CAGR in FY10-14) with domestic
CASA at 28.3%. Credit has grown at a CAGR of 18.8% in FY10-14 to
| 124359 crore. Corporate loans constitute 50% of the total credit. The
asset quality of the bank is relatively better than its peers. The GNPA
stood at | 5003 crore (4.2% of credit) while NNPA was at 2.55% of credit
as on H1FY15. RoA was at 0.67% on a PAT of | 1161 crore (FY14). The
bank is adequately capitalised with Tier I capital adequacy ratio at 10.1%.
At the CMP, the bank is trading at 0.8x FY14 ABV.
Going ahead, retail, SME loans to be focus area
Indian Bank is a south-based PSU bank with a major presence in Tamil
Nadu (990 branches). The bank’s advances have grown at a healthy CAGR
of 18.8% over FY10-14 to | 124359 crore. Corporate loans (| 64639 crore)
comprise 52% of advances, followed by agricultural loans (| 19047 crore)
at 15%. The management has guided an advances growth of 10-12% for
FY15 with focus on growing the low ticket retail and SME loans while
going slow on corporate loans citing the overall weak economic
environment. They believe that while business sentiments have improved
post the formation of the NDA government, on the ground, a pick-up in
execution is yet to gain momentum.
Asset quality relatively better than peers
NPAs stood at 4.2% of credit at | 5003 crore with NNPA at 2.55% of credit
at the end of Q2FY15. The asset quality continues to be under pressure
with slippages of ~| 2800 crore each year in FY13 and FY14 and a similar
guidance for FY15. Restructured assets (RA) surged to | 9663 crore but
the management does not see any major additions to the RA if the
economy improves from hereon. Stressed assets at 10.4% of average
advances are relatively better compared to other PSU banks. The PCR
stands at 57.4% as on H1FY15.
Comparatively good performance; bank adequately capitalised
The profitability of the bank, of late, has seen some erosion mainly due to
higher credit cost. The FY14 PAT de-grew 21% YoY to | 1161 crore due
to higher provisioning. The RoA, therefore, contracted to 0.67%. It was
healthy and above 1% for a long time earlier. The management has
indicated a higher PAT in FY15 led by trading gains and reduced cost of
funds. We believe, among south-based PSU banks, Indian Bank is well
placed to benefit from the economic turnaround. The bank is adequately
capitalised for future growth with Tier 1 capital adequacy ratio at 10.1%.

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