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Dolat Capital Report
Indian Bank reported net interest income and pre-provision operating profit growth of 29%/47% YoY, slightly behind estimates. Profit after tax miss despite lower tax rate was mainly owing to higher prudential provisions, even as non-performing asset related provisions declined sharply.
Slippages were high at 2.3%, led by elevated micro, small and medium enterprise slippages. Indian Bank further raised provisions against restructured book to 20% in Q4.
Restructured portfolio at ~2.5% has come down sharply, partly led by repayments. Cumulatively, slippages from restructured book (excluding of Future retail) have been ~15% over the last 1.5 years, in line with peers.
Loan growth at 5% QoQ, though broad based, was led by corporate. With 40% of total advance (based on one year Marginal Cost Of Funds Based Lending Rate) likely to re-price in H1 FY24, near tern net interest margin outlook remains strong.
Industry best provision coverage ratio to 86%, limited corporate stress, and continued recoveries to aid credit costs of 150 basis points for FY24/25E. We factor in higher NIM over the next few quarters and lower credit costs for FY24E/25E, resulting in 7-9% upgrade in earnings for FY24/25E.
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