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South Indian Bank announced its 2QFY2011 results. The bank registered moderate net
profit growth of 6.1% yoy to `77cr, above our estimates of `63cr, mainly on account of
better-than-estimated operating performance both on the NII and non-interest income
fronts. Advances grew by healthy 4.9% qoq and 35.7% yoy, while deposits increased by
7.4% qoq and by 27.3% yoy. This resulted in 19.4% yoy growth in NII. On a sequential
basis, calculated NIMs suggest a ~35bp improvement. Gross and net NPA ratios stood at
1.27% (1.33% in 1QFY2011) and 0.38% (0.39% in 1QFY2011), respectively, implying a
provision coverage ratio of 70.5%, excluding write-offs (71.0% in 1QFY2011). The bank’s
CAR continued to be healthy at 15.9%. We would be revising our estimates post interaction
with the management.
At the CMP, the stock is trading at 1.6x FY2012E ABV, which we believe is expensive
relative to peers and its own historical range. Hence, we maintain a Neutral
recommendation on the stock.
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