Please refer to important disclosures at the end of this report
1
Particulars (
`
cr) 1QFY12 4QFY11
% chg (qoq)
1QFY11
% chg (yoy)
NII 1,030 1,111
(7.3)
927
11.2
Pre-prov. profit 781 903
(13.5)
838
(6.8)
PAT 407 439
(7.3)
368
10.5
Source: Company, Angel Research
For 1QFY2012, Indian Bank reported a decline of 7.3% qoq in its net profit to
`
407cr, mostly in-line with our estimates. Healthy growth momentum combinedwith stable asset quality was the key highlight of the result.
We recommend anAccumulate rating on the stock.Strong growth in business; Asset quality remains stable:
Net advances for thebank grew strongly by 9.6% qoq and 21.3% yoy to
`
85,510cr, while depositsgrew by 4.4% qoq and 21.3% yoy to
`
110,425cr. CASA ratio as of 1QFY2012stood at 31.0%, up 20bp from 30.8% in 4QFY2011. The effect of rising interestrates was felt in 1QFY2012, with cost of deposits increasing by 90bp qoq to7.2%. However, yield on advances increased by 101bp qoq to 10.9%, leading toa sequential increase of 11bp in reported NIM to 2.5%. During the quarter,non-interest income decreased by 8.2% qoq (down 29.9% yoy) to
`
249cr.Treasury income was strong at
`
47cr (
`
5cr in 4QFY2011), while income fromrecoveries was weak at
`
19cr (
`
89cr in 4QFY2011). For 1QFY2012, the bank’soperating expenses increased by 3.9% qoq to
`
498cr, driven by a 16.0%sequential rise in employee expenses to
`
359cr.
Outlook and valuation:
The bank’s relatively higher rural and semi-urbanpresence has enabled it to maintain reasonable cost of funds, resulting in moreresilient NIMs than other mid-size PSU banks. At the CMP, the stock is trading at5.4x FY2013E EPS of
`
39.8 and 0.9x FY2013E ABV of
`
244.3, which is belowour target multiple of 1.0x FY2013 ABV. Hence, we recommend an Accumulaterating on the stock with a target price of
`
232, implying a 9.0% upside fromcurrent levels.
Key financials
Y/E March (
`
cr) FY2010 FY2011 FY2012E FY2013ENII 3,161 4,036 4,166 4,434
% chg 21.2 27.7 3.2 6.4
Net profit 1,555 1,714 1,625 1,748
% chg 24.9 10.2 -5.2 7.6
NIM (%) 3.5 3.7 3.3 3.0
EPS (
`
) 35.1 38.8 36.9 39.8
P/E (x) 6.1 5.5 5.8 5.4P/ABV (x) 1.4 1.2 1.0 0.9RoA (%) 1.7 1.5 1.2 1.2RoE (%) 25.6 23.5 19.0 17.8
Source: Company, Angel Research
ACCUMULATE
CMP
`
213Target Price
`
232
Investment Period 12 Months
Stock InfoSector BankingMarket Cap (
`
cr) 9,154Beta 1.152 Week High / Low 317/197 Avg. Daily Volume 28,387Face Value (
`
) 10BSE Sensex 16,858Nifty 5,073Reuters Code INBA.BOBloomberg Code INBK@INShareholding Pattern (%)Promoters 80.0MF / Banks / Indian Fls 4.2FII / NRIs / OCBs 10.0Indian Public / Others 5.8 Abs. (%) 3m 1yr 3yrSensex (9.0) (7.8) 11.1Indian Bank (8.0) (8.2) 83.1
Vaibhav Agrawal
022 – 3935 7800 Ext: 6808vaibhav.agrawal@angelbroking.com
Shrinivas Bhutda
022 – 3935 7800 Ext: 6845shrinivas.bhutda@angelbroking.com
Varun Varma
022 – 3935 7800 Ext: 6847varun.varma@angelbroking.com
Indian Bank
Performance Highlights
1QFY2012 Result Update | Banking
August 9, 2011
Indian Bank
|
1QFY2012 Result Update
August 9, 2011
2
Exhibit 1:
1QFY2012 performance
Particulars (
`
cr)
1QFY12 4QFY11
% chg (qoq)
1QFY11
% chg (yoy)
Interest earned 2,781 2,594
7.2
2,122
31.1
Interest expenses 1,751 1,483
18.1
1,195
46.5
NII 1,030 1,111
(7.3)
927
11.2
Non-interest income 249 272
(8.2)
355
(29.9)
Operating income 1,279 1,383
(7.5)
1,282
(0.2)
Operating expenses 498 480
3.9
444
12.1
Pre-prov. profit 781 903
(13.5)
838
(6.8)
Provisions & cont. 177 127
39.6
344
(48.5)
PBT 604 776
(22.2)
494
22.3
Prov. for taxes 197 337
(41.5)
126
56.8
PAT 407 439
(7.3)
368
10.5
EPS (
`
) 4.9 5.3
(7.3)
4.4
10.5
Cost-to-income ratio (%) 38.9 34.7 34.7Effective tax rate (%) 32.6 43.5 25.5Net NPA (%) 0.5 0.5 0.8
Source: Company, Angel Research
Exhibit 2:
1QFY2012 actual vs. Angel estimates
Particulars (
`
cr) Actual Estimates
Var. (%)
NII 1,030 1,112
(7.4)
Non-interest income 249 273
(8.8)
Operating income 1,279 1,385
(7.6)
Operating expenses 498 481
3.5
Pre-prov. profit 781 904
(13.6)
Provisions & cont. 177 287
(38.3)
PBT 604 617
(2.1)
Prov. for taxes 197 200
(1.5)
PAT 407 417
(2.4)
Source: Company, Angel Research
Indian Bank
|
1QFY2012 Result Update
August 9, 2011
3
Growth momentum continues; though NIM declines 43bp qoq
Net advances for the bank grew strongly by 9.6% qoq and 21.3% yoy to
`
85,510cr, while deposits grew by 4.4% qoq and 21.3% yoy to
`
110,425cr. CASA deposits grew by healthy 4.8% qoq and 15.0% yoy to
`
34,220cr. CASA ratio as of1QFY2012 stood at 31.0%, up 20bp from 30.8% in 4QFY2011. Bulk depositsincluding CDs constituted 16.5% of overall deposits as of 1QFY2012.The effect of rising interest rates was felt in 1QFY2012, with cost of depositsincreasing by 90bp qoq to 7.2%. However, yield on advances increased by 101bpqoq to 10.9%, leading to a sequential increase of 11bp in reported NIM to 2.5%.Management has guided for NIM of ~3.5% for FY2012.The bank opened 32 branches and 51 ATMs during 1QFY2012. The bank isfocusing on increasing both its retail side assets and liabilities going forward andplans to grow its loan book at 3–4% above the system growth for FY2012.
Exhibit 3:
Corporate and overseas credit driving advances growth
Segment (
`
cr) 1QFY12 4QFY11
% chg (qoq)
1QFY11
% chg (yoy)
Agriculture
11,638 11,048
5.3
10,433
11.5
SME
9,638 9,681
(0.4)
8,666
11.2
Corporate
45,768 39,915
14.7
34,963
30.9
Overseas credit
3,367 3,138
7.3
2,959
13.8
Retail
12,100 11,944
1.3
11,006
9.9
Gross advances
82,511 75,726
9.0
68,027
21.3
Source: Company, Angel Research
Exhibit 4:
Strong business growth during 1QFY2012
Source: Company, Angel Research
Exhibit 5:
CASA ratio stable at 31%
Source: Company, Angel Research
8 . 6 2 . 1 6 . 5 1 . 8 9 . 6 6 . 7 7 . 7 3 . 1 4 . 7 4 . 4
74.870.973.271.174.768.070.072.074.076.0-2.04.06.08.010.012.01QFY112QFY113QFY114QFY111QFY12 Adv. qoq chg (%)Dep. qoq chg (%)CDR (%, RHS)
3 2 . 7 3 2 . 2 3 2 . 0 3 0 . 8 3 1 . 0
29.627.422.715.115.0-10.020.030.040.029.030.031.032.033.01QFY112QFY113QFY114QFY111QFY12CASA ratioCASA yoy growth (%, RHS)
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