Yes Securities initiates coverage on this PSU bank stock with ‘Buy’ rating

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Domestic brokerage and research firm Yes Securities examined the PSU banking space, taking a comprehensive look at as many as 8 key banks in this specific space. Upon its analysis, the brokerage found the thesis around Indian Bank (INBK) interesting and has initiate coverage on the bank stock with a Buy rating. 

“We like Indian Bank on account of the following reasons: (1) INBK has a superior growth profile compared with key PSU bank peers (2) INBK has several loan segments of healthy yield, whose share in loan book can inch up going forward, providing fillip to NIM (3) Headline asset quality metrics, admittedly, do not make for a good reading but we think asset quality is at an inflection point,” the brokerage note stated.

Yes Securities has assigned a BUY rating on Indian Bank shares with a price target of 188 apiece. The bank stock is up over 35% in a year’s period whereas it has surged about 13% in 2022 (year-to-date or YTD) so far.

Indian Bank has displayed a relatively higher growth trajectory in recent years, growing at a 3- year growth CAGR of 6.8% over FY18-21. This growth CAGR has to be viewed in the context of the pandemic constraining generic loan growth. Importantly, it is the second highest CAGR in our 8-bank comparison universe, behind only State Bank of India (SBI).

“Importantly, of the 852 bn Agri loans as of December 2021, 681 bn are crop loans, of which 442 bn are Jewel loans, which, regardless of near-term hiccups, have a positive long-term outlook, especially in South India, where INBK has 32% of its branches. Capital is not a constraint for the bank, with CET1 ratio sitting at 11.4% as of December 2021, the second highest in our comparison universe,” Yes Securities added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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