Indian Bank soars 17% in 2 days on healthy Q2 results; nears 52-week high

Motilal Oswal Financial Services reiterated its 'BUY' rating on Indian Bank with a revised target price of Rs 650 per share.

Shares of Indian Bank moved higher by 6 per cent to Rs 584.65 on the BSE in Tuesday’s intra-day trade, extending its Monday’s rally on the back of heavy volumes after the bank reported a healthy set of numbers for the second quarter ended September 2024 (Q2FY25), led by lower provisions and higher other income.

 

In the past two days, the market price of state-owned bank soared 17 per cent. The stock was inching towards its 52-week high of Rs 626.35 touched on June 3, 2024. At 02:25 pm; Indian Bank was trading 5 per cent higher at Rs 579.55, as compared to 0.21 per cent rise in the BSE Sensex. The average trading volumes at the counter jumped nearly four-fold, with a combined 6.8 million shares changing hands on the NSE and BSE.

 

 

In Q2FY25, Indian Bank’s net profit rose 36 per cent year-on-year (YoY) to Rs 2,707 crore, predominantly due to a sharp rise in non-interest income and a decline in provisions for stressed loans.

 

Net interest income (NII) expanded by 8 per cent YoY to Rs 6,194 crore in Q2FY25, compared to Rs 5,740 crore in the same quarter a year ago. The net interest margin (NIM) declined by seven basis points (bps) to 3.39 per cent in Q2FY25 compared to 3.46 per cent in Q2FY24.

 

The asset quality profile improved, with gross NPAs declining to 3.48 per cent in September 2024 from 4.97 per cent in September 2023. Net NPAs declined from 0.60 per cent in September 2023 to 0.27 per cent in September 2024.

 

According to analysts, a healthy overall performance across parameters and favourable valuation warrants an upside for the stock. 

Motilal Oswal Financial Services reiterated its ‘BUY’ rating on Indian Bank with a revised target price of Rs 650 (1.2x FY26E ABV).

 

In Q2FY25, Indian Bank’s loan growth remained healthy, while deposit growth was modest, which led to a slight increase in the credit-deposit (CD) ratio. The bank has 58 per cent of its book linked to MCLR, which should provide cushion to margins, particularly as the rate cycle turns. 

 

The management expects margins at 3.4 per cent in FY25 and the growth trend to remain steady. It will continue to focus on profitable growth. SMA 1 increased due to one account, which was transferred from SMA-2. Asset quality ratios have improved, with the bank maintaining a best-in-class coverage ratio with lower slippages, providing comfort on incremental credit costs, the brokerage firm said.