Motilal Oswal Reiterates 'Buy' On Indian Bank On Reasonable Valuations

Motilal Oswal Report

Stocks to Buy: We maintain a Buy rating on the stock with a target price of Rs 670 (1.3 times FY26E adjusted book value).

Indian Bank has emerged as one of the better performing public sector banks with the best-in-class profitability and asset quality ratios. The bank stands out for its prudent strategy that is well-aligned with market conditions, i.e., increasing its marginal cost of fund based lending rate book and strengthening its balance sheet by making additional specific and floating provisions.

Additionally, improvements in the bank's underwriting quality have strengthened its asset quality ratios, with gross non-performing asset at 3.5%, net non-performing asset at 0.3%, and provision coverage ratio at 92.5%. The transition to expected credit loss norms will have a limited impact on the bank’s RoA trajectory, given its healthy capital ratios and robust provisioning coverage. In terms of leadership changes, the current tenure of Mr. S.L. Jain as MD and CEO is ending in December 2024 and he will be replaced by Mr. Binod Kumar, ED of PNB. Indian Bank remains our preferred stock among the mid-size PSU banks.

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