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Anand Rathi Report
Indian Bank's Q3 FY23 slippages were Rs 13.1 billion (1.2% of loans) lower than in the previous quarter and better than we expected. Asset quality improved in all segments. With the bulk of the accounts stressed by Covid-19- related restrictions already delinquent/restructured in the last few quarters, we expect slippages to moderate from now.
The gross non-performing asset ratio fell 77 bps QoQ to 6.5% due to strong recoveries and higher write-offs. Indian Bank's overall collection efficiency was stable in Q3 FY23 at ~95%.
The gross loan book was Rs 4.5 trillion (up ~12.8% YoY) driven by secular growth across segments. With a cleaner balance sheet, adequate capital and a strong deposit base, we expect a pick-up in credit growth from now; accordingly, we model low-teen growth for FY24 and FY25.
With a pick-up in business growth and a moderating slippage run-rate, credit costs are expected to be soft.
Higher business growth combined with benign credit costs would lead to strong profitability in the medium term. We estimate a 0.9% return on asset through FY24/25.
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