Target:₹188
CMP: ₹160.15
We examined, carefully, the PSU banking space, taking a comprehensive look at as many as 8 key banks in this specific space. Upon our analysis, we found the thesis around Indian Bank (INBK) interesting and we initiate coverage with a Buy rating.
We like Indian Bank on account of the following reasons: Indian Bankk has a superior growth profile compared with key PSU bank peers; Indian Bank has several loan segments of healthy yield, whose share in loan book can inch up going forward, providing fillip to NIM; Headline asset quality metrics, admittedly, do not make for a good reading but we think asset quality is at an inflection point.
Indian Bank has displayed a relatively higher growth trajectory in recent years, growing at a 3-year growth CAGR of 6.8 per cent over FY18-21.
Housing loans, which occupy 13 per cent of Indian Bank's overall loan book as of December 2021, are dominated by mortgages, which have a healthier yield profile compared with home loans.
GNPA ratio for Indian Bank at 9.1 per cent as of December 2021 is the Fourth highest in our 8-bank comparison universe and a reflection of poor asset quality outcomes in the past for Indian Bank.
We assign a Buy rating on Indian Bank with a price target of ₹188.