Accumulate South Indian Bank; target of Rs 27: Geojit Financial Services

Geojit Financial Services research report on South Indian Bank

South Indian Bank (SIB), is a private sector bank headquartered in Kerala. The bank has 955 branches, with majority of them in South India. Currently, the bank has a loan book size of Rs.84,714cr and a deposit base of Rs.105,451cr. In Q2FY25, the bank reports a 11%YoY growth in interest income to Rs. 2354.7cr, driven by 10.5%YoY growth in interest from loans. Advances increased by 13% YoY during Q2FY25, driven by strong disbursements in personal loan book. Moreover, the corporate and personal loan books reported a 22.2% YoY and 22.9% YoY, growth, respectively. PAT grew by 18.2%YoY, aided by strong growth in fee income and lower provisions. Additionally, NIM stabilized at 3.2% as stress from the cost of deposits was passed on. Asset quality improved, with GNPA/NNPA at 4.4%/1.3%. The Provision Coverage Ratio (PCR) increased to 80.7% compared to 77.8% in Q2FY24. With stress from legacy books decreasing, the focus now shifts to profitability. We expect the bank to deliver ~1% ROA in the medium term.

Outlook

As a result, we remain optimistic about the company’s long-term growth and reiterate our Accumulate rating. However, since a moderation in advance growth is anticipated, we revise our target price to Rs.27 based on 0.63x FY26E BVPS.