South Indian Bank Ltd. share price target

South Indian Bank (SIB) reported a mixed set of numbers with softer business growth and higher credit costs broadly offset
by strong other income and contained opex

Muted NII and lower Treasury income led to the decline in South Indian
Bank’s Q4 operating profit.

Despite muted loan growth, South Indian Bank (SIB) reported a strong Q2FY24 with PAT at INR 2.75bn (97bps RoA), driven by benign credit costs while asset quality improved. In the last three years, SIB has come a long way and we believe the ongoing transformation journey should re-accelerate under Mr Seshadri.

The RBI has approved the candidature of Mr P R Seshadri (ex MD & CEO of Karur Vysya Bank) as MD & CEO of South Indian Bank (SIB) for three years with effect from 1st Oct’23. In our view, Mr Seshadri was instrumental in putting new-age lending practices, overhauling risk architecture and transforming HR practices at Karur Vysya Bank (KVB) during his term (Sep’17-Mar’20), a time when the banking system was undergoing severe profitability pressure due to corporate asset quality cycle.

Despite healthy other income, South Indian Bank (SIB) reported weak Q1FY24 PAT at INR 2.0bn, pulled down by 33 bps decline in NIM, rise in staff costs and jump in provisions on the back of massive write-offs. Corporate book has risen massively by 17% QoQ, putting pressure on NIM as well.

Led by NIMs uptick, negative net slippages and strong other income (including lumpy TWO recovery), South Indian Bank (SIB) has reported strong Q4FY23 with PAT of Rs3.34bn and annualised RoAs at 1.26%. FY23 has been one of the strongest years for the bank with highest-ever business, record disbursement and highest ever tier 1.

South Indian Bank (SIB), post the onboarding of new MD in Sep’20, continues to deliver in line with its Vision 2025 programme. It focused on growing the balance sheet in a calibrated manner with emphasis on NIMs and asset quality.

South Indian Bank (SIB), post the onboarding of new MD in Sep’20, focused on growing the balance sheet in a calibrated manner with prime focus on NIM and asset quality.

The bank is currently under transformation stage and key business parameters like advance mix, CASA ratio, asset quality, PCR etc has been showing significant improvement. NII grew 9% QoQ aided by improvement in margins with NIM improving 15bps sequentially to 2.64%. Gross advances displayed a positive trend as it registered a sequential growth of 1.6% led by 7.2% growth in Agri advances. Asset quality improved with GNPA/NNPA at 6.56%/3.52%...

Business parameters like advance mix, CASA ratio, asset quality etc has improved while bank reported dull earnings numbers. NII contracted 20.5% YoY and 2.7% QoQ due to the combined effect of margin contraction and decline in loan book. All segments except Agriculture reported YoY decline during the quarter with corporate declining 24% in line with management strategy and SME declining 10%. Asset quality improved with GNPA/NNPA at 6.65%/3.85%...

Signs of continuous progress is visible in few operational parameters, however, deteriorating asset quality due to second wave will extend the span of recovery. Deposit grew by 3% YoY supported by 10% YoY increase in retail deposit while bulk deposit reduced by 52%. CASA ratio improved to 30.4% compared to 29.7% in FY21. Advances de-grew by 11% YoY due to second wave impact and...

Outlook remains grim on MSME & Retail with likely further rise in stress face issue from asset quality with slippages of Rs8.8bn (6% annualized). Bank and on other outlook on asset quality remains grim. Profitability will continue to suffer going ahead with improvement depending on level of slippages. Positives have been (i) deposit franchise has held up with CASA at +30% (up...