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Please refer to important disclosures at the end of this report
 1 
Particulars (
`
cr) 4QFY12 3QFY12
% chg (qoq)
4QFY11
% chg (yoy)
NII 1,083 1,170
(7.5)
1,111
(2.6)
Pre-prov. profit 797 912
(12.5)
903
(11.7)
PAT 345 526
(34.3)
439
(21.3)
 Source: Company, Angel Research
Indian Bank reported a dismal performance for 4QFY2012, both on theoperational and asset quality front. The bank’s net profit declined by 21.3% yoy (34.3% qoq) to
 ` 
345cr, despite being aided by tax write back of
 ` 
110cr, on theback of almost 3.5 times higher provisioning, higher operating expenses andmuted growth in operating income.
We recommend Accumulate on the stock.
 
NIM declines sequentially; Asset quality deteriorates:
During 4QFY2012,advances for the bank grew at a healthy pace of 20.0% yoy, mainly aided by strong growth in the corporate and commercial and agri segments. On theliability side, growth in deposits was rather moderate at 14.2% yoy. CASA deposits grew at a relatively slow pace of 13.0% yoy, on the back of 8.7% yoy growth in current account deposits despite decent 14.0% yoy growth in savingsaccounts deposits, which led to a 33bp yoy fall in CASA ratio to 30.5% (up by 33bp sequentially). The bank’s yield on advances declined by 76bp qoq due tointerest reversal of
 ` 
151cr, while cost of deposits also declined by 8bp qoq,leading to a 42bp sequential fall in reported NIM to 3.2%. Growth in fee incomefor the bank was strong at 31.9% yoy to
 ` 
234cr. Recoveries from written-offaccounts were sluggish, declining by 48.3% yoy to
 ` 
46cr. The bank’s asset quality deteriorated sequentially during 4QFY2012, with both gross and net NPAsincreasing considerably on a qoq basis. Annualized slippage ratio increased on asequential basis to 5.5% in 4QFY2012 as against comfortable 1.6% witnessed in3QFY2012, with major sectoral contributions from infra, glass, textile, gem andgold trade, auto and engineering and real estate. PCR (incl. technical write offs)dipped by 637bp to 70.1%. Additionally, the bank’s restructured book increasedby ~
 ` 
3,330cr to
 ` 
8,902cr during the quarter, mainly on account of restructuringof loans worth ~
 ` 
800cr to Air India and ~
 ` 
1,200cr to the power sector. Goingahead, the bank is expected to restructure ~
 ` 
1,157cr worth of advances in1QFY2013, of which ~50% would be Rajasthan discoms.
Outlook and valuation:
 
The stock currently trades at 0.7x FY2014E ABV, below itsfive-year trading range (0.8x-1.3x) and median of 1.0x. Due to cheap valuations,
we have an Accumulate rating on the stock with a target price of
`
197
. However,in our view, upsides are likely to be lower than peers, as we remain circumspecton the bank’s high RoAs.
Key financials
Y/E March (
`
cr) FY2011 FY2012 FY2013E FY2014ENII 4,036 4,418 5,075 5,789
% chg 27.7 9.5 14.9 14.1
Net profit 1,714 1,747 1,805 1,915
% chg 10.2 1.9 3.3 6.1
NIM (%) 3.7 3.5 3.4 3.3
EPS (
`
) 38.8 39.8 41.1 43.7
P/E (x) 4.6 4.5 4.3 4.1P/ABV (x) 1.0 0.8 0.7 0.7RoA (%) 1.5 1.3 1.2 1.1RoE (%) 23.5 20.4 18.2 16.9
 Source: Company, Angel Research
 
ACCUMULATE
CMP
 ` 
177Target Price
 ` 
197
Investment Period 12 months
Stock InfoSector BankingMarket Cap (
 ` 
cr) 7,626Beta 1.152 Week High / Low 265/167 Avg. Daily Volume 55,877Face Value (
 ` 
) 10BSE Sensex 16,216Nifty 4,908Reuters Code INBA.BOBloomberg Code INBK@INShareholding Pattern (%)Promoters 80.0MF / Banks / Indian Fls 4.7FII / NRIs / OCBs 9.1Indian Public / Others 6.2 Abs. (%) 3m 1yr 3yrSensex (9.1) (12.5) 36.6Indian Bank (27.7) (23.6) 81.3
Vaibhav Agrawal
022 – 3935 7800 Ext: 6808vaibhav.agrawal@angelbroking.com
Varun Varma
022 – 3935 7800 Ext: 6847varun.varma@angelbroking.com
Sourabh Taparia
022 – 3935 7800 Ext: 6872sourabh.taparia@angelbroking.com
Indian Bank
Performance Highlights
4QFY2012 Result Update | Banking
May 14, 2012
 
 
 Indian Bank
|
4QFY2012 Result Update 
May 14, 2012
 2
Exhibit 1:
 
4QFY2012 performance
Particulars (
`
cr) 4QFY12 3QFY12
% chg (qoq)
4QFY11
% chg (yoy)
Interest earned 3,191 3,224
(1.0)
2,594
23.0
- on Advances / Bills 2,414 2,494
(3.2)
1,984
 21.6
- on investments 773 725
6.5
605
 27.7
- on balance with RBI & others 5 5
6.9
5
1.5
Interest Expended 2,108 2,054
2.7
1,483
42.2
Net Interest Income 1,083 1,170
(7.5)
1,111
(2.6)
Other income 307 281
9.1
272
13.0
Other income excl. treasury 280 263
6.4
266
5.1
- Fee Income 234 235
(0.5)
177
31.9
- Treasury Income 27 18
 48.2
5
 404.4
- Recoveries from writ.-off acc 46 28
64.2
89
(48.3)
Operating income 1,390 1,451
(4.3)
1,383
0.5
Operating expenses 592 540
9.7
480
23.5
- Employee expenses 386 372
3.9
309
 25.0
- Other Opex 206 168
 22.8
170
 20.8
Pre-provision Profit 797 912
(12.5)
903
(11.7)
Provisions & Contingencies 562 236
137.9
127
343.1
PBT 235 675
(65.1)
776
(69.7)
Provision for Tax (110) 150
(173.6)
337
(132.6)
PAT 345 526
(34.3)
439
(21.3)
Effective Tax Rate (%) (46.7) 22.1
(6886)bp
43.5
(9019)bp
 Source: Company, Angel Research
Exhibit 2:
 
4QFY2012 actual vs. Angel estimates
Particulars (
`
cr) Actual Estimates
Var. (%)
NII 1,083 1,220
(11.3)
Non-interest income 307 334
(8.0)
Operating income 1,390 1,554
(10.6)
Operating expenses 592 581
 2.0
Pre-prov. profit 797 973
(18.1)
Provisions & cont. 562 202
178.6
PBT 235 771
(69.5)
Prov. for taxes (110) 247
(144.6)
PAT 345 525
(34.2)
 Source: Company, Angel Research
 
 Indian Bank
|
4QFY2012 Result Update 
May 14, 2012
 3
Exhibit 3:
 
4QFY2012 performance 
Particulars 4QFY12 3QFY12
%chg (qoq)
4QFY11
%chg (yoy)
Balance sheet
 Advances (
 ` 
cr) 90,324 87,337
3.4
75,250
 20.0
Deposits (
 ` 
cr) 120,804 118,970
1.5
105,804
14.2
Credit-to-Deposit Ratio (%) 74.8 73.4
136bp
71.1
365bp
Current deposits (
 ` 
cr) 6,924 6,430
7.7
6,368
8.7
Saving deposits (
 ` 
cr) 29,942 29,489
1.5
26,271
14.0
CASA deposits (
 ` 
cr) 36,866 35,919
 2.6
32,639
13.0
CASA ratio (%) 30.5 30.2
33bp
30.8
(33)bp
CAR (%) 13.5 11.8
163bp
13.6
(9)bp
Tier 1 CAR (%) 11.1 9.6
158bp
11.0
11bp
Profitability Ratios (%)
Cost of deposits 6.8 6.9
(8)bp
5.6
115bp
Yield on advances 10.9 11.7
(76)bp
10.6
33bp
Yield on investments 7.5 7.6
(16)bp
7.2
 27bp
Reported NIM 3.2 3.6
(42)bp
3.9
(70)bp
Cost-to-income ratio 42.6 37.2
544bp
34.7
794bp
Asset quality
Gross NPAs (
 ` 
cr) 1,851 1,190
55.5
740
150.0
Gross NPAs (%) 2.0 1.4
68bp
1.0
105bp
Net NPAs (
 ` 
cr) 1,197 695
72.1
397
 201.4
Net NPAs (%) 1.3 0.8
53bp
0.5
80bp
Provision Coverage Ratio (%) 70.1 76.5
(637)bp
84.3
(1417)bp
Slippage ratio (%) 5.5 1.6
397bp
1.9
361bp
NPA to avg. assets (%) 1.4 0.3
103bp
0.8
55bp
 Source: Company, Angel Research
 Advances growth healthy; NIM declines sequentially 
During 4QFY2012, advances for the bank grew at a healthy pace of 20.0%yoy, mainly aided by strong growth in the corporate and commercial and agrisegments, which grew by 20.9% and 24.5% yoy, respectively.On the liability side, growth in deposits was rather moderate at 14.2% yoy.
CASA deposits grew at a slower pace of 13.0% yoy, on the back of 8.7% yoy growth in current account deposits, despite decent 14.0% yoy growth in savingsaccounts deposits, which led to a 33bp yoy fall in CASA ratio to 30.5% (up by 33bp sequentially).The bank’s yield on advances declined by 76bp qoq to 10.9% due to interestreversal of
 ` 
151cr, while cost of deposits also declined by 8bp qoq to 6.8%,leading to a 42bp sequential fall in reported NIM to 3.2%. Yield on investments forthe bank declined by 16bp qoq to 7.5%.
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