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MOSL: INDIAN BANK (Buy)-Operating performance in line-higher provisions drive losses

Indian Bank: Operating performance in line; higher provisions drive losses

(INBK IN, Mkt Cap USD1.6b, CMP INR233, TP INR280, 20% Upside, Buy)

 

• INBK reported a loss of INR1.9b (our estimate: PAT of INR1.8b), dragged by higher provisions of INR16.4b (our estimate: INR10.1b). NII increased 8% YoY to INR17.6b (in-line), as the margin expanded 7bp QoQ to 2.95%. For FY19, NII grew by 12%, while PAT stood at INR3.2b (v/s INR12.6b in FY18).
• Total income grew 10% YoY, as fee income picked up to INR3.4b in a seasonally strong quarter, while forex income nearly doubled to INR841m. However, growth in total income trailed that in opex (+13% YoY), leading to modest PPoP growth of 7% YoY. C/I ratio was at 46.6% (4QFY18: 45.3%).
• Loan book grew by 15.8% YoY to INR1.8t, while deposits increased 16.2% YoY to INR2.4t. The share of RAM advances stood at 58.1% (v/s 56.9% in 4Q FY18). CASA deposit growth stood at 9.2% YoY, leading to a marginal decline in the CASA ratio to 35.5% (v/s 35.7% in 3QFY19).
• Slippages moderated to INR10.1b (v/s INR17.5b in 3QFY19), while recoveries/upgrades came in at INR2.6b/INR0.6b. Absolute GNPA increased 1.2% QoQ to INR133.5b, while NNPA declined 10.3% QoQ to INR67.9b. GNPA/NNPA ratio declined 35bp/67bp QoQ to 7.1%/3.8%, while the PCR ratio was up 649bp QoQ to 49.1% (PCR incl. TWO stood at 65.7%).