Country’s Chennai Based Bank has Emerged as Asia’s Top-Performing Bank Stock

Indian Bank has emerged as Asia’s top-performing bank stock in the past year, driven by a focus on consumer loans that are less likely to sour than corporate advances. Indian Bank is a century-old state-owned lender based in the country’s south.
The Chennai-based firm is directing to boost retail lending, which contains mortgages and loans underpinned by gold as a guarantee, to account for 60% of its loan book over the next two years,
“We are positioning ourselves as a strong retail and mid-segment bank as growth in that segment is consistent,” said the CEO Mahesh Kumar Jain in an interview last month. “We are not expanding our book in corporate credit” except to companies where the bank sees “visible cash flows,” he said.
Investors have been favoring consumer financiers over their commercial-focused peers amidst the surge in bad loans from corporate debtors that has given India the highest stressed-loan ratio among Asia’s other major economies. Shares of the government banks with large corporate banks like Syndicate Bank and Andhra Bank have underperformed than their peers in the past 12 months amid concerns over corporate repayments.
Indian Bank, meanwhile, has more than tripled over the last year, which is the most among 198 Asian creditors valued at more than $1 billion, as per statistics. Manappuram Finance Ltd. and Muthoot Finance Ltd. are among other consumer-focused lenders that have supported in that time.
All of the 9 analysts tracing Indian Bank recommend stockholders to buy or hold the stock, giving it a consensus rating of 4.33 percent out of five, the highest among India’s state-run banks, according to a study.
Analysts have a consensus 12-month target price of 287.11 rupees on the stock and its price-to-book valuation had jumped to 0.88 times, close to the most expensive level in three years. Despite that surge in the price, Indian Bank’s equity is still trading at a discount to its net assets.
With its focus on retail loaning, Indian Bank’s bad loans are no longer a major concern for investors, Praveen said, adding that the management’s leadership also suggests an improvement in upcoming quarters. The lender has stayed clear of highly indebted corporates that may find it tough to repay loans and is expecting asset quality to improve with a revival in the economy, Jain said.
The ratio for the nation’s banking system was 12.3 percent by the end of last year, while the level for retail loans — the segment that Indian Bank is focusing on — is just 2.4 percent, according to central bank data.
The government owns 82 percent of the lender, which had 2,617 branches and 28.57 million customers, according to its website. The bank had a loan book of 1.26 trillion rupees ($18.8 billion) at the end of previous year.

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