Visit http://indiaer.blogspot.com/ for complete details South Indian Bank
2QFY11 – Robust business growth, healthy asset quality
2QFY11 profits rise 6.1%. South Indian Bank’s 2QFY11 net
profit growth was led by healthy net interest income growth
(19.4% yoy) and lower NPA provisions (down 81.9% yoy). We
maintain Buy on the Bank as its prudent loan growth, strong
deposit franchise and healthy asset quality make it an attractive
pick among small-cap banks.
Robust business growth, improving margins. Advances and
deposits grew 35.7% yoy and 27.3% yoy respectively. NIM
improved 17bp qoq to 3%. However, share of CASA marginally
declined yoy, from 24.3% to 23.9%. Low-cost (current and savings
accounts) and non-residential external (NRE) deposits constitute
38.6% of the Bank’s deposits base, enabling the Bank to keep
deposit costs low, thereby protecting margins. We expect NIM of
2.7% in FY11e and 2.8% in FY12e.
Strong fees, lower treasury gains. Good business growth led to
an impressive 41.7% yoy growth in fees. Treasury gains plunged
83% yoy, leading to a 31.5% drop in non-interest income.
Healthy asset quality, adequately capitalized. Gross NPAs
rose 2.1% qoq, NPA coverage has been stable at 71%. Net NPAs
are just 0.4% of loans, one of the best among peers. Capital
adequacy is now at 14.4%, with tier-I capital comprising ~12% of
risk-weighted assets.
Valuation. At our price target, the stock would trade at PABV of
1.7x FY12e and 1.4x FY13e. Risks: Slow economic growth leading
to credit growth being lower than estimated and higher NPAs.
No comments:
Post a Comment