Emkay Global Financial’s research report on Indian Bank
Indian Bank reported healthy credit growth at ~11% YoY/5.3% QoQ, but NIMs retraced to 3.4% levels (similar to Q2) due to impact of recent policy rate cuts. However, higher NPA recoveries/PSL fees and lower provisions led to a 4% beat on PAT at ~Rs29.6bn and peer-best RoA at 1.4%. Asset quality continues to improve, with GNPA ratio down by 17bps QoQ to 3.1%, while NNPA ratio remained at an industry-low level of 0.2% and PCR at a high of 94%. The bank indicated that it may need to reverse Bhushan Power recoveries of Rs12bn, if the review petition is rejected. However, it believes it could fetch better recoveries (>40%) in case of rebidding and is hence not a concern. Going forward, the bank expects credit growth to remain range-bound, while margins may moderate a bit.
Outlook
However, better fee income including PSL fees and lower LLP should help the bank sustain its superior RoA (1.1-1.3% over FY26-28E). Factoring in the bank’s consistent superior RoA delivery, asset quality, capital buffer, and credible management, we retain BUY with unchanged TP of Rs 675, at 1.1x FY27E ABV.
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Indian Bank – 05052025 – emkay
