Broker’s call: Indian Bank (Buy)

Target: ₹675

CMP: ₹629.80

Indian Bank has been one of the best-performing PSBs for several years now. Our recent interaction with its new MD and CEO Binod Kumar reconfirms the company’s unwavering focus on profitability over growth. The management has given guidance for moderate credit growth of 10-12 per cent in FY26, with a clear focus on increasing the portfolio share of mid-corporate and SME loans, which remains the bank’s forte and should also support margins in the long run.

The recent draft RBI guidelines on gold loans and PSL fees could impact growth in this segment. Challenges could persist in FY26 for the industry’s CASA growth as the gap between SA and TD rates remains high; however, the management remains hopeful of a meaningful recovery from FY27.

The bank has peer-best asset quality, with an NNPA ratio at a low of about 0.2 per cent, and does not see any meaningful asset quality risk. The recent Supreme Court stay on liquidating Bhushan Power has come as a relief. Amid the ongoing rate-cut cycle, we believe the Indian Bank is relatively well placed to limit the margin contraction, given its higher share of the MCLR book. This, coupled with better treasury gains amid falling G-Sec yields and lower LLP, should help the bank deliver a superior RoA of 1.1-1.3 per cent over FY26-28. Hence, we retain Buy and our TP of ₹675, implying 1.1x FY27E ABV.

Published on June 5, 2025