Indian Bank's 2QFY09 results were higher than our estimates. Reported NII grew 45% YoY (adjusted NII up 42% YoY)
v/s our est. of 24% YoY growth. Margins improved sharply during the quarter.
? NIMs improved 66bp QoQ (63bp YoY) to 3.86% in 2QFY09.
? Business growth remains strong with loans growing 49% YoY and 8% QoQ to Rs481b. Deposits grew 20% YoY and
4% QoQ to Rs646b. The bank has reduced its investment book (~Rs20b) during the quarter which also helped to
grow the loan book aggressively.
? The bank shed Rs2.6b of bulk deposits and reduced its share to 10.3% (11.2% in 1QFY09).
? Other income (ex-trading profits and recoveries) grew 24% YoY to Rs1.6b.
? Asset quality continues to remain strong with the GNPA ratio below 1% and provision coverage ratio of 82%. The
bank has comfortable CAR of 11.27% (tier I at 10.1%).
Maintain Buy: We like the bank’s strategy of relying on core retail deposits to grow its loan book in this uncertain
environment. We expect EPS of Rs27.4 in FY09 and BV of Rs128. RoE and RoA would be 23% and 1.6% in FY09. The
stock trades at 1.1x FY09E BV and 4.9x FY09E EPS. On FY10 estimates, the stock trades at 0.9x BV and 4.4x EPS.
Maintain Buy.

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