Indian Bank announced its 4QFY2011 results today, registering a net profit growth of 7% yoy to Rs439cr, however on a sequential basis the net profit declined by 10.7%.The result was below our estimates of Rs486cr mainly on account of higher tax provisioning (43.5% effective tax rate for 4QFY2011) than factored in by us. Net Interest Income (NII) grew by 18.9% yoy which was slightly above our estimates The net advances for the bank grew by a marginal 1.8% qoq and 21.1% yoy to Rs 75,250cr, while the deposits grew by 4.7% qoq and 19.9% yoy to Rs1,05,804cr. Non-interest income grew by 9.2% qoq but came in lower by 7.3% on a yoy basis to Rs272cr. Operating expenses remained muted sequentially but increased by 35.2% on a yoy basis to Rs480cr. Cost to income ratio further improved to 34.7% from 36.9% in 3QFY2011. The bank's asset quality also showed improvement with Gross and Net NPAs in absolute terms declining by 1.6% qoq and 4.8% qoq, respectively. The Gross and Net NPA ratios of the bank both improved marginally by 4 bps each to 0.98% and 0.53%, respectively, with a provision coverage ratio of 84.3% including write-offs (83% in 3QFY2011).
At the CMP, the stock is trading at 0.9x FY2013E ABV. We maintain a Buy recommendation on the stock with the Target Price of Rs269. We may revise our estimates post interaction with the management.
| Exhibit 1: 4QFY2011 Actual vs. Estimates | |||
| (Rs cr) | Actual | Estimates | Var (%) |
| Net interest income | 1,111 | 1,045 | 6.3 |
| Non-interest income | 272 | 270 | 0.4 |
| Operating income | 1,383 | 1,316 | 5.1 |
| Operating expenses | 480 | 522 | (8.1) |
| Pre-prov. profit | 903 | 794 | 13.7 |
| Provisions & contingencies | 127 | 100 | 26.6 |
| PBT | 776 | 694 | 11.9 |
| Prov. for taxes | 337 | 208 | 62.1 |
| PAT | 439 | 486 | (9.6) |
Source: Company, Angel Research
Exhibit 2: 4QFY2011 Performance summary
| (Rs cr) | 4QFY2011 | 3QFY2011 | % chg (qoq) | 4QFY2010 | % chg (yoy) |
| Interest earned | 2,594 | 2,392 | 8.5 | 2,025 | 28.1 |
| Interest expenses | 1,483 | 1,354 | 9.5 | 1,091 | 36.0 |
| Net interest income | 1,111 | 1,038 | 7.1 | 934 | 18.9 |
| Non-interest income | 272 | 249 | 9.2 | 293 | (7.3) |
| Operating income | 1,383 | 1,286 | 7.5 | 1,227 | 12.7 |
| Operating expenses | 480 | 474 | 1.1 | 355 | 35.2 |
| Pre-prov. profit | 903 | 812 | 11.2 | 872 | 3.5 |
| Provisions & contingencies | 127 | 54 | 136.8 | 214 | (40.6) |
| PBT | 776 | 758 | 2.4 | 659 | 17.8 |
| Prov. for taxes | 337 | 267 | 26.3 | 249 | 35.6 |
| PAT | 439 | 491 | (10.7) |
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