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Our view – Asset quality control, relatively margin stability and reasonable growth make us maintain stance

Gross slippages and provisions decline sequentially while management guides for decline in provisions: Gross NPA additions amounted to Rs 16.67bn for 3QFY24 compared with Rs 19.82bn during 2QFY24. Provisions were Rs 13.5bn, down by -13% QoQ and -46% YoY, translating to calculated annualised all-inclusive credit cost of 112bps. Management stated that provisions would be slightly lower in FY25 compared with FY24

Margin declined slightly on sequential basis and was within guidance, with management calling for stable margin: Domestic NIM declined 3 bps QoQ to 3.49%. This is within the guidance made at the beginning of the year of maintaining FY23 margin plus or minus 10-15 bps, with FY23 margin being 3.41%. Management stated that margin will be protected at current levels. The high proportion of MCLR book at 61% of total loan book will ensure that any deposit cost rise will translate into reasonable asset yield rise.

Loan growth has been slightly ahead of guidance, with management flagging similar growth next year: Overall loan growth was 13% YoY, driven by RAM, which grew 13% YoY. The bank had guided for 10-12% growth at the beginning of the year but has achieved 13% so far on a broad-based basis. Management stated that the bank would like to grow at a similar pace next year.

We maintain ‘BUY’ rating on INBK with an unchanged price target of Rs 550: We initiated on INBK with BUY, in our report released in March 2022, and as only our 3rd PSB pick, as our thumbs up to the PSU bank theme. Since then, INBK has returned 187%. We value the bank at 1.2x FY25 P/BV for an FY24E/25E/26E RoE profile of 13.1/14.4/15.3%.

Result Highlights (See “Our View” above for elaboration and insight)

Asset quality: Gross NPA additions amounted to Rs 16.67bn (annualized NPA addition ratio of 1.3%), while recoveries and upgrades amounted to Rs 11.43bn

Margin picture: Domestic NIM at 3.49% was down -3bps QoQ, due to cost of deposits rising more than yield on advances

Asset growth: Gross advances grew 3.6%/12.9% QoQ/YoY, driven sequentially by Overseas loans, MSME, Agri and Retail Loans

Opex control: Total opex grew 5.5%/14.7% QoQ/YoY, Employee Exp. grew 7.3%/17.3% QoQ/YoY and other expense rose 2.3%/10.3% QoQ/YoY 

Fee income: Core fee income rose 5.8%/21% QoQ/YoY, driven higher sequentially by growth in commission on LC/BG and Misc. fee income

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