Indian Bk up 8%, hits new high on solid Q3 nos; Motilal expects more upside

In past six months, the share price of Indian Bank has appreciated by 43 per cent, as against 6.4 per cent rise in the S&P BSE Sensex.

Shares of Indian Bank hit a record high of Rs 478.60, as they surged 8 per cent on the BSE in Thursday’s intra-day trade backed by heavy volumes in an otherwise weak market owing to strong December quarter (Q3FY24) results. The bank's net profit jumped 52 per cent to Rs 2,119 crore, on the back of improvements in core income and a reduction in bad loans. It had posted profit of Rs 1,396 crore in a year ago quarter.

At 10:18 AM; Indian Bank was quoting 6.5 per cent higher at Rs 470.65, as compared to 0.69 per cent decline in the S&P BSE Sensex. The average trading volumes at the counter jumped over 10-fold. A combined 5.9 million equity shares had changed hands on the NSE and BSE.

In past six months, the share price of Indian Bank has appreciated by 43 per cent, as against 6.4 per cent rise in the benchmark index.

In Q3FY24, Indian Bank’s net interest income (NII) increased by 6 per cent year-on-year (YoY) to Rs 5,815 crore from Rs 5,499 crore in Q3FY23. Net interest margin (NIM) stood 3.41 per cent in Q3FY24, against 3.46 per cent in Q2FY24 and 3.67 per cent in Q3FY23. The management guided to maintain NIM at around 3.41 per cent.

On the asset quality front, the bank's gross Non-Performing Assets (NPAs) declined to 4.47 per cent of the gross loans by the end of December 2023 from 6.53 per cent a year ago. Similarly, net NPAs or bad loans came down to 0.53 per cent as compared to 1 per cent in 2022.

Gross loan growth was healthy at 13 per cent YoY, while deposits grew 9.6 per cent YoY. CD ratio increased marginally to 77.9 per cent, while the bank continued to focus on profitable growth.

Brokerage firm Motilal Oswal Financial Services (MOFSL) said Indian Bank reported a decent quarter with earnings beat led by a healthy revenue growth and lower provisions. Loan growth remained largely broad-based with healthy trends across all business segments (particularly in Retail, Agri, and Corporate segments), while healthy other income provided further support to the revenue trajectory.

Indian Bank has gradually raised its MCLR-linked loans to 61 per cent, which should provide cushion to margins, especially when the interest rate cycles start reversing. The bank expects the growth trend to remain steady and it will continue to focus on profitable growth. Asset quality ratios improved further as the bank maintained best-in-class coverage ratio, which, along with low SMA book, provides comfort on incremental credit cost, MOFSL said in result update. It reiterates ‘buy’ rating on the stock with a revised target price of Rs 525 per share.