Indian Bank soars 10% on heavy volumes; hits 5-year high in subdued market

The stock hit a 5-year high of Rs 381.40 and has zoomed 35% in two months and is inching towards its record high level of Rs 428 touched in November 2017

Shares of Indian Bank zoomed 10 per cent to hit a five-year high of Rs 381.40 on the BSE in Monday’s intra-day trade on the back of heavy volumes and a steady earnings outlook.

The stock of the public sector lender also inched toward its record high level of Rs 428 touched in November 2017. In the the past two months, the market price of the bank has zoomed 35 per cent.

At 02:34 pm; Indian Bank was quoting 9 per cent higher at Rs 376.30 as compared to a 0.07 per cent decline in the S&P BSE Sensex. The average trading volumes on the counter jumped four-fold today. A combined 5.9 million shares had changed hands on the NSE and BSE.
 

Indian Bank had reported healthy results for the June quarter (Q1FY24) with a 41 per cent year-on-year (YoY) jump in net profit at Rs 1,709 crore. The strong net profit growth during the quarter was on the back of 26 per cent YoY rise in net interest income (NII) at Rs 5,703 crore and treasury gains, along with moderation in credit cost. Net interest margin (NII) improved to 3.61 per cent from 3.1 per cent in the year ago quarter.

The bank's advances grew 13 per cent YoY at Rs 4.79 trillion. The bank reported healthy loan growth, particularly in the Retail, Agri, and Corporate segments.

The bank's asset quality improved led by a decline in slippages to Rs 1,850 crore (1.8 per cent annualized). Gross non-performing assets ratio (GNPA) improved by 266 bps YoY to 5.47 per cent in Q1FY24 from 8.13 per cent in Q1FY23, NNPA ratio improved by 142 bps YoY to 0.70 per cent from 2.12 per cent in the year ago quarter.

Indian Bank expects the growth trend to remain healthy going ahead. Asset quality improved with reduction in slippages and healthy recovery/upgrades. Deposit growth was modest and CASA witnessed a moderation. Although the restructured witnessed some moderation, it remains elevated. Additionally, the increase in the SMA book has prompted us to keep a close watch on the asset quality closely, Motilal Oswal Financial Services had said in the result update.

According to analysts at Emkay Global Financial Services, given a higher share of agri gold loans the bank has potential to scale-up priority sector lending certificates (PSLC) fees. Bank now has one of the lowest NNPAs among PSBs at 0.7 per cent; thus, incremental LLP should decelerate, leading to better RoA. The bank remains well capitalized, with CET 1 at 12.3 per cent, but it has taken enabling approval to reduce promoter stake below 75 per cent, to meet SEBI guidelines, the brokerage firm had said in the result update.