Buy Indian Bank; target of Rs 304: Cholamandalam SecuritiesNovember 22, 2018
In 2QFY19 Indian bank’s total advances grew at a healthy 19.5% YoY (in line with CSEC estimate of 20.3%) to INR 1.72tn.
The domestic loan book grew by 19.6% YoY (4.5% QoQ), driven by growth in RAM (Retail Agricultural and MSME) segment, which was up by 24.6% YoY (6.3% QoQ).
Corporate & Commercial segment also saw a growth of 13.2% YoY.
Overall deposits recorded moderate growth of 10.5% YoY (beating CSEC estimate of 7.7%) and stood at INR 2.2tn, led by strong growth in term deposits (12.4% YoY).
While Savings grew by 8.5% YoY, demand deposits demonstrated muted growth (1.6% YoY).
Though slippages were higher this quarter, which limited the expansion in margins (due to interest reversal), we gain comfort from healthy cash recoveries and >60% provision coverage.
Hence, we maintain a BUY rating with a revised target price of INR 304, assigning a P/ABV of 0.9X FY20E.
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For the quarter ended 31-03-2018, the company has reported a Consolidated Interest Income of Rs 11310.56 Crore, up 4.27 % from last quarter Interest Income of Rs 10846.94 Crore and up 6.85 % from last year same quarter Interest Income of Rs 10585.33 Crore. The bank has reported net profit after tax of Rs 1470.92 Crore in latest quarter.