This PSU bank stock has hit record high in weak market; zoomed 121% in 1 yr

Indian Bank share price hit a record high of Rs 596.70, up 3.5% on the BSE after the S&P Global Ratings revised its rating outlook to Positive from Stable

Shares of Indian Bank hit a record high of Rs 596.70, up 3.5 per cent on the BSE in Thursday's intraday trade, in an otherwise weak market, after S&P Global Ratings reaffirmed their 'BBB-' long-term and 'A-3' short-term issuer credit ratings on the bank. The agency also revised its rating outlook to 'Positive' from 'Stable'.

The stock price of the public sector undertaking (PSU) bank surpassed its previous high of Rs 595.95 touched on May 23. In comparison, the S&P BSE Sensex was down 0.63 per cent at 74,036 at 11:34 AM.  In the past one year, the market price of Indian Bank has more-than-doubled, zooming 121 per cent, as against 17.6 per cent rise in the benchmark index.

S&P Global Ratings said India's banking system continues to ride the good economic growth momentum, well supported by recent structural improvements in the system. "Indian financial institutions' resilience has therefore built up. We expect India's banks to maintain their strong financial performance over the next 12-24 months," the rating agency said. . CLICK HERE FOR MORE DETAILS

Thus far in calendar year 2024, Indian Bank has outperformed the market by surging 40 per cent after it posted a strong all-around performance. In comparison, the S&P BSE Sensex is up 2.4 per cent.

In the March quarter (Q4FY24), Indian Bank reported healthy credit growth at 15 per cent year-on-year (Y-o-Y)/5 per cent quarter-on-quarter (Q-o-Q), mainly led by strong traction in retail, SME, and Agri loans. Within Retail, Vehicle Finance (VF), and mortgages were the primary growth drivers, whereas Personal Loans (PL) growth was largely muted. The recent RBI push to have a re-look at co-lending arrangements has possibly eased lending in retail gold loans.

Analysts at Emkay Global Financial Services expect the bank to sustainably deliver 1.1-1.2 per cent RoA/15-16 per cent return on equity (RoE) over FY25-27E, led by healthy margin, PSLC fees/treasury gains, and contained opex. 

"Higher CET 1 at 13.5 per cent is likely to effectively absorb any ECL impact and designated MD&CEO Asheesh Pandey’s (ED BOM) credible all-around experience adds comfort," the brokerage firm had said in its result update report. It retained a 'BUY' rating on Indian Bank, lifting its target price to Rs 650 per share (Rs 550 earlier), valuing the bank at 1.2x FY26E ABV (from 1x FY26E ABV).

Meanwhile, in its FY24 annual report, Indian Bank said that it expected the credit growth rate to moderate in FY25. Deposit growth is likely to improve in FY25 as banks have been strongly emphasizing the growth of their liability franchise.

Compression of interest spreads, may exert pressure on the profitability, though the same is expected to remain healthy. On the asset quality front, it is expected that the same will continue improving. The capital position of banking sector is expected to remain comfortable in the near term, the bank said.

"Global economy is forecasted to remain stable on the back of better outlook in several developed and large emerging economies. In India, the economic activity is expected to be supported by an upturn in the investment cycle on account of the Government’s continued thrust on capital expenditure, higher capacity utilisation, underlying resilience of the services sector, double digit credit growth and healthier Corporate and Bank balance sheets, Indian Bank said.