Indian Bank - Tax reversal comes to the rescue - CSEC Research

Indian Bank's revenues and operating profit were along expected lines. PAT, however, was higher than expected; led by tax reversal. PAT was up 7%YoY at Rs 5.26bn. Net interest income continued to drive operating profits; non-interest income also chipped in with a 13.1%YoY growth.

Quarterly Highlights

- Credit growth stumbles, alternate credit (investments) up ~50%
- CASA stable at about 25%
- Asset quality healthy, net NPLs at 0.8%
- Margins under pressure
- Net interest income up 12.8%YoY
- Operating profits growth curbed at 12.3%YoY

Valuation

At current levels the stock trades at 0.97X FY13E adjusted book value (standalone) and 4.08X FY13E EPS (standalone). Buoyed by superior net interest margins and aided by a higher leverage on equity, Indian Bank enjoys a laudable return on equity in the PSU space. We expect the bank to be among the outperformers in the PSU banking space. With valuation having run up we rate the stock a MARKETPERFORMER on the stock with a target price of Rs 256. Key risks include a less than expected loan book expansion and a significant variation in spreads.

Source : Equity Bulls

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