YES Securities
Target: ₹1,050
CMP: ₹842.05
Net Interest Margin (Global) was at 3.29 per cent, up 6 bps q-o-q and 6bps y-o-y. Yield on advances was at 8.09 per cent, up by 2bps q-o-q but down -49bps y-o-y. The bank has remained cautious on thinly priced loans, either exiting the loans or improving rates.
The bank may achieve the upper end of the prior guidance of 3.1-3.25 per cent. Incrementally, MCLR could impact margin negatively by 2 bps, ceteris paribus.
Management does not see any trigger for margin to either go up or down from here. Advances are up 2.6 per cent q-o-q and 13.9 per cent y-o-y.
Management stated that one should be mindful of the gap between credit and deposit growth and the same should not start eating into net interest margin.
Gross NPA additions amounted to ₹1,300 crore for Q1-FY27 (₹1,390 crore during Q4-FY26), translating to an annualised slippage ratio of 0.77 per cent for the quarter.
Provisions were ₹1,190 crore, down by -2.5 per cent q-o-q but up 73 per cent y-o-y, translating to calculated annualised credit cost of 72bps. The bank has also made an incremental floating provision of ₹1,000 crore towards ECL during the quarter.
We maintain Buy rating on with a revised price target of ₹1,050. We initiated Indian Bank with Buy, in our report released in March 2022, since then, it has returned nearly 6x. We value the bank at 1.4x FY28 P/BV for an FY27/28/29E RoE profile of 15.9/15.6/15.1 per cent.