Indian Bank Q4 Results Review - Steady Quarter; Healthy Provision Buffers: Dolat Capital

Dolat Capital Report

Indian Bank reported a healthy quarter with net interest income growth of 9% YoY, stable net interest margin at 3.44% (+3 basis points QoQ), sharp decline in slippages to ~1.1%, and low credit costs at 1%, aiding return on asset of 1.15% despite pension related provisions.

Robust loan growth at 6% QoQ (led by retail, corporate and agri gold) and industry best [provision coverage ratio at 89% were other key positives.

The bank continues to hold higher standard provision buffers relative to peers at ~90 bps, after factoring 15% PCR against restructured book and 40 bps of general provisions. Even as NIM moderate, operating leverage and moderation in credit costs should aid stable RoAs over FY25/26E at 1.1%.

We raise our FY25/26E earnings estimate by 9% each, mainly driven by lower opex assumptions. Maintain ‘Accumulate’ rating with revised target price of Rs 610 (Rs 580 earlier), valuing at 1.25 times FY26E price/adjusted book against return on asset/return on equity of 1.1%/16%. The stock currently trades at 1.1 times FY26E adjusted book .

Indian Bank remains our preferred play in the public sector bank space.

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