Indian Bank Upgraded to Buy: Target Price Set at Rs 1051

Indian Bank Posts Steady Performance in Q4FY26

Indian Bank has delivered a steady performance for the fourth quarter of fiscal year 2026, with its return on assets (RoA) and return on equity (RoE) coming in at 1.3% and 15.9%, respectively. These figures are broadly in-line with expectations, indicating that the bank is maintaining its stability in the market.

The bank's asset quality has remained healthy, with gross and net slippages at 89bps and 51bps, respectively. This indicates continued normalization across segments and a decrease in potential bad loans. Credit growth has been stronger than expected, coming in at 14.7% year-over-year (y/y), led by retail and micro, small, and medium enterprises (MSME) traction. The bank's current account savings account (CASA) ratio has improved by 51bps quarter-over-quarter (q/q), supporting the bank's funding mix.

Core operating performance has been largely in-line with expectations, despite lower-than-expected net interest margin (NIM) compression (down 5bps q/q) and strong fee income growth. The bank has also controlled its operating expenses effectively. Notably, the bank has created a contingent provision of Rs3.1 billion in Q4FY26, factoring in potential risks from the situation in West Asia.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Looking ahead, we expect the bank's credit growth to be in-line with the system, while profitability is expected to remain steady.

We maintain a BUY rating on the stock with a 12-month target price of Rs1,051, valuing it at 1.4x FY28E price-to-asset book value (P/ABV).