IGI Logo

* Asset quality: Gross NPA additions amounted to Rs 25.66bn (annualized NPA addition ratio of 2.2%), while cash recovery amounted to Rs 13.71bn

* Margin picture: Domestic NIM at 3.59% was down -15bps QoQ, driven lower as yield on advances contracted whereas cost of deposits expanded sequentially

* Asset growth: Advances grew 4.9%/13.9% QoQ/YoY driven sequentially by Overseas loans and Corporate loans

* Opex control: Total opex grew 10.5%/12.8% QoQ/YoY, Employee Exp. grew 11.5%/13.9% QoQ/YoY and other expenses rose 8.9%/11% QoQ/YoY ? Fee income: Core fee income rose 29.8%/12.4% QoQ/YoY, driven higher sequentially largely by Misc. fee income.

Our view – Initiated with BUY in March 2022, INBK more than doubles

INBK has worked to actively upfront provisions in FY23 and management is now calling for a material decline in provisions: Provisions made during the quarter amounted to Rs 25.69bn. Of these, Rs 14.44bn were provisions made on standard advances, while Rs 10.4bn were NPA provisions, per se. The total restructured book amounts to about Rs 150bn. The bank has made provisions on the restructured book to take coverage on this book to 20%. Management stated that provisions will be substantially lower in FY24 compared with FY23 because provisions have been upfronted in FY23 and SMA position is also under control. Management stated that the domestic NIM of 3.41% registered for FY23 will be protected in FY24: The bank is focusing on making loans that are on MCLR and fixed rate so that yield is protected when interest rates start to decline. Some of the factors that impacted NIM for the quarter included excess liquidity. The LCR for the quarter was 158% whereas the excess SLR on the balance sheet amounted to about Rs 350bn. Secondly, interest reversal in 4Q amounted to Rs 2.36bn compared to Rs 1.39bn in 3Q. The bank, however, conceded that it has not been able to pass on the entire repo rate hike due to price competition. Management has guided for a loan growth of 10-12% for FY24, while stating that the guidance is conservative: Retail, agri, MSME and corporate loans have grown 13%, 16%, 7% and 12% YoY, respectively. We maintain ‘BUY’ rating on INBK with a revised price target of Rs 425: We initiated on INBK with BUY, in our report released in March 2022, as only our 3rd PSB pick. Since then, INBK has returned 105%.We value the bank at 1.0x FY24 P/BV for an FY24E/25E RoE profile of 13.8/15.2%. (See Comprehensive con call takeaways on page 2 for significant incremental colour.)

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer