Buy Indian Bank; target of Rs 280: Motilal Oswal

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Motilal Oswal's research report on Indian Bank

INBK reported a loss of INR1.9b (our estimate: PAT of INR1.8b), dragged by higher provisions of INR16.4b (our estimate: INR10.1b). NII increased 8% YoY to INR17.6b (in-line), as the margin expanded 7bp QoQ to 2.95%. For FY19, NII grew by 12%, while PAT stood at INR3.2b (v/s INR12.6b in FY18). Total income grew 10% YoY, as fee income picked up to INR3.4b in a seasonally strong quarter, while forex income nearly doubled to INR841m. However, growth in total income trailed that in opex (+13% YoY), leading to modest PPoP growth of 7% YoY. C/I ratio was at 46.6% (4QFY18: 45.3%).

Outlook

INBK has a strong capital position with tier-1 of 11.3%, and thus, is well poised to sustain healthy loan growth. We maintain Buy with a TP of INR280 (0.8x FY21E ABV).

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