Angel Broking neutral on South Indian Bank

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Angel Broking neutral on South Indian Bank

Angel Broking has maintained neutral rating on South Indian Bank (SIB), in its January 17, 2012 research report.

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Angel Broking has maintained neutral rating on South Indian Bank (SIB), in its January 17, 2012 research report.

"For 3QFY2012, South Indian Bank (SIB) reported healthy net profit growth of 35.7% yoy (7.7% qoq) to `102cr, in line with our estimates. Strong performances on operating income front (31.0% yoy) and sustained asset quality were the key highlights of the result."

"For 3QFY2012, the bank's business growth continued to be above industry levels, with advances growing by 30.5% yoy (7.3% qoq) and deposits growing by 25.4% yoy (2.4% qoq). On the CASA front, saving account deposits grew by a healthy 22.0% yoy, while growth in current deposits was lower at 13.3% yoy. Growth in gold loan portfolio for the bank continued to be healthy, registering a healthy 7.7% increase on a sequential basis. Share of gold loans in the overall loan book as of 2QFY2012 stands at c.26%. Other income growth on a yoy basis (20.4%) for the bank was primarily driven by higher fee income (32.7%). The asset quality of the bank remained healthy during 3QFY2012, with both gross and net NPA ratios declining on a sequential basis. As of 3QFY2012 the gross NPA ratio stood at 0.94% (0.99% in 2QFY2012), while the net NPA ratio stood at 0.24% (0.25% in 2QFY2012). The provision coverage ratio also improved marginally to 75.2% from 74.7% in 2QFY2012."

"Current valuations at 1.1x FY2013E ABV have factored in the positives in our view and are considerably above the valuations of small and mid-sized PSU banks which have similar fundamentals, even after factoring in the robust growth witnessed due to the sharp rise in gold loans. Also, considering erosion of low-cost advantages of NRE deposits post their deregulation by the RBI in December 2011, we expect margins to come under pressure by 18-20bp over the next few quarter. Hence we maintain our Neutral stance on the stock," says Angel Broking research report.

Public holding more than 90% in Indian cos  

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To read the full report click on the attachment