Hold South Indian Bank; target of Rs 25: Emkay

19521 Investors following South Ind Bk. Share this News with them.

0

Like this story, share it with millions of investors on M3

Hold South Indian Bank; target of Rs 25: Emkay

Emkay Global Financial Services has recommended hold rating on South Indian Bank (SIB) with a target of Rs 25, in its January 16, 2012 research report.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Automobile monthly sales update - Dec 11: GEPL Capital Hold Infosys; target Rs 2945: R K Global PINC Research neutral on auto sector ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about South Ind Bk See messages about South Ind Bk South Ind Bk BSE | NSE 01/06/12 Are Mutual Funds betting on South Ind Bk?

Emkay Global Financial Services has recommended hold rating on South Indian Bank (SIB) with a target of Rs 25, in its January 16, 2012 research report.

"South Indian Bank (SIB) `s NII grew by 33.5%yoy to Rs2.7bn, inline with expectation. The growth in NII was driven by 30.6%yoy growth in advances and 8bps expansion in NIM's to 3.05%. Higher other income at Rs599mn (as against expectation of 532mn) was offset by higher provisioning at Rs222mn (as against expectation of Rs142mn). Resultantly, net profit grew by 35.8%yoy to Rs1.02bn. The balance sheet growth remains strong with 30.6%yoy growth in advances and 25.3% growth in deposits. The growth in advances was led by corporate and gold loans. On the asset quality front though slippage rose slightly from Rs274mn in Q2FY12 to Rs345mn in Q3FY12, the overall asset quality remained healthy with GNPA and NNPA at Rs2.3bn/ 581mn, 0.9% and 0.2% of advances respectively. Provision cover also remained healthy and stable at ~75%."

"The bank reported 31%yoy( 8%qoq) growth in advances led by 25.9%qoq growth in large corporate and 14.1%qoq growth in retail book. The growth in retail was primarily led by gold loans which grew by ~9%qoq to Rs65.7bn constituting 26.2% of the overall advances. The management has now suggested to shift its focus from gold loan to corporate loan, going forward. For the same, the bank will be opening six corporate finance branches in major metros during FY12."

"Though the bank has been a steady performer with margins @3%, strong advance growth and one of the best asset quality among peers, balance sheet skewness towards gold loan has been a risk for quite some time. Though we welcome the change in management focus from gold loans to corporate loans, we believe that could result in some margin pressure for the bank, considering the fact that the banks get only ~2% margin on ex gold loan book. At CMP, the stock is trading at 1.2x FY13E ABV with average RoA/ RoE of 1% and 19% respectively. With elevated risks coming from high concentration of the gold loan portfolios in terms of growth as well as margins, we downgrade our rating from ACCUMULATE to HOLD with revised price target of Rs 25," says Emkay Global Financial Services research report.

Shares held by Mutual Funds/UTI

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment