Motilal Oswal - Indian Bank (INDIANB) MOSL: INDIAN BANK (Buy)-Operating performance in line-Earnings to recover gradually

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Motilal Oswal

Nitin Aggarwal

MOSL: INDIAN BANK (Buy)-Operating performance in line-Earnings to recover gradually

Indian Bank: Operating performance in line; Earnings to recover gradually

(INBK IN, Mkt Cap USD1.5b, CMP INR229, TP INR350, 53% Upside, Buy)

INBK reported PAT of INR1.5b (significantly below our estimates of INR2.9b) weighed down by elevated provisions of INR10b (25% above our estimate). NII grew 12% YoY to INR17.3b (4% above our estimates) led by ~20% YoY loan growth to INR1.7t (3% above our estimates). Margins for the quarter stood at 2.97%. Muted treasury gains led to 40% YoY decline in other income to INR4.3b.
Loan book grew ~20% YoY to INR1.7t while deposits grew 10% YoY to INR2.2t. The share of RAM advances stood at 58.7% (v/s 56.4% in 2QFY18). CASA growth was muted at 7.4% YoY and trailed deposit growth leading to 175bp QoQ decline in CASA ratio to 36.1%.
Slippages spiked to INR22.5b (v/s INR14.4b in 1QFY19) while recoveries/ upgrades came in at INR2.3b/INR0.4b, respectively. Absolute GNPA/NNPA increased 4.3%/17.7% QoQ to INR123.3b/INR70.6b. GNPA/NNPA ratio stood at 7.2%/4.2%, respectively, while PCR ratio moderated 652bp QoQ to 42.8%. Total net NPA + restructured book stood at INR85.4b in 2QFY19, which corresponds to 5.1% of loans (v/s INR80b in 1QFY19).
Other Highlights:(1) Bank guided for INR10b of gross slippages each in 3Q and 4Q, (2) majority of the slippages during the quarter were from the corporate book due to 4/5th consortium accounts from road, infra sector and sugar sector.

12/11/2018 10 EN

Underlying

Indian Bank

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.

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INE562A01011 National Stock Exchange of India India

Provider

Motilal Oswal

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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Analysts

Nitin Aggarwal

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MOSL: INDIAN BANK (Buy)-Operating performance in line-Earnings to recover gradually

MOSL : INDIAN BANK: Operating performance healthy; asset quality improves

INDIAN BANK sees an upgrade to Slightly Positive due to a better fundamental star rating

MOSL: INDIAN BANK (Buy)-Operating performance showing recovery signs

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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