MOSL: INDIAN BANK (Buy)-Focus resumes on Growth-NIM improves 20bp QoQ
​Indian Bank: Focus resumes on Growth; NIM improves 20bp QoQ
(INBK IN, Mkt Cap USD2.3b, CMP INR311, TP INR360, 16% Upside, Buy)
- Indian Bank (INBK) reported PAT of INR3.2b (50% beat) v/s INR845m in 4QFY16 (subdued due to the RBI's AQR), led by strong NII of INR13.85b (+22% YoY) and controlled opex (8% YoY, 9% QoQ). Provisioning was 24% higher than estimate at INR8.07b due to high MTM provisions during the quarter (INR1.63b).
- GNPA increased just 2% QoQ in absolute numbers to INR98.6b whereas, OSRL declined 27% QoQ to INR43.2b. Bank has already recognized 20% of the private power sector exposure and 75% of steel exposure as NPA.
- Overall loan book grew 5% QoQ (-1% YoY) to INR1.28T. After a largely flat loan book of last three years, new management focus is growing the balance sheet aggressively. With the capital in place (CET 1 11.68%), management is planning to grow loans in high teens and double the loan book in next five years.
- NIM (calculated) improved 20bp QoQ, driven by lower cost of funds (5.44% v/s 5.79% in 4QFY16), higher yield on investments (7.43% v/s 6.88%) and better CD ratio (70% v/s 66%), partially offset by lower yield on advances (8.84% v/s 9.33%). We appreciate management's efforts to improve margins without taking additional risk - NIMs are highest in 15 quarters.
Indian Bank offers deposits, loans and services. The Bank's segments include Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Operations. The Company offers products under various categories, including agriculture, corporates, personal/individual, business, professional self-employed, small and medium-sized enterprise (SME), cards, education, Non-Resident Indian (NRI), property and technology. Its deposits include savings bank (SB) account, such as SB Vikas Khata, SB Platinum, SB Power, SB Silver and SB Gold; current account, including Premium Current Account and IB i-Freedom Current Account; term deposits, including fixed deposit, re-investment plan, insured recurring deposit, variable recurring deposit and facility deposit, and NRI accounts, including Non-Resident Ordinary Account. It also offers services, which include premium services, insurance services and e-payment of indirect taxes. The Bank has approximately 70 specialized branches across the country.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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