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Business growth strong, margins decline…
South Indian Bank (SIB) maintained its strong growth momentum with
both deposits (10% QoQ) and advances (8% QoQ) surging 29% YoY.
Deposits growth was bolstered by a strong growth in term deposits of
32% YoY and 11% QoQ to | 23317 crore while CASA stood at 22%. The
bank is expected to remain in a steady growth phase and deliver 22%
CAGR over FY11-13E to | 48734 crore. Over this period, we see a similar
21% CAGR in PAT to | 428 crore.
�� Adjusted NII grew 48%, reported NII at 180%...
The bank reported an NII of | 221 crore against | 79 crore in
Q4FY10. In Q4FY10, the bank accounted for | 71 crore of tax outgo
for FY10 in the single quarter of Q4FY10. NIM for FY11 stood at
3.1% against 3% in 9MFY11, which came as a positive surprise. We
expect some moderation in NIM in FY12E while it should pick up
again in FY13E to ~3%.
�� …CASA ratio declines QoQ but not a major concern area
Even though the CASA ratio stood at 21.5% against 22.5% in
Q3FY11, the bank managed to improve its NIM. This shows the
pricing power of the bank. This phenomenon is also supported by
~13% of low cost NRE deposits of the total deposits of the bank. We
see a stable share of low cost deposits till FY13E.
�� Asset quality - no concerns as of now
The bank is one of the best in terms of asset quality with reported
GNPA@1.1% and NNPA@0.3%. SIB witnessed an improvement in
asset quality even in actual terms QoQ. The restructured portfolio
stands at | 551 crore (2.6% of portfolio) and it has a healthy PCR of
74%. We expect asset quality to be stable in the coming period.
Valuation
The stock is currently trading at 1.1x FY13E ABV at the CMP of | 22. The
bank has delivered RoA of 1.1% backed by a strong performance on the
core business and asset quality front. It also plans to add 60 more
branches in FY12, which will further strengthen its growth endeavour. We
expect SIB to deliver RoA of 1%, RoE of 20% (without factoring any
dilution) and stable asset quality with NNPA of 0.3%. We recommend
BUY on the stock with a target price of | 26 (valued at 1.3x FY13E ABV).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Business growth strong, margins decline…
South Indian Bank (SIB) maintained its strong growth momentum with
both deposits (10% QoQ) and advances (8% QoQ) surging 29% YoY.
Deposits growth was bolstered by a strong growth in term deposits of
32% YoY and 11% QoQ to | 23317 crore while CASA stood at 22%. The
bank is expected to remain in a steady growth phase and deliver 22%
CAGR over FY11-13E to | 48734 crore. Over this period, we see a similar
21% CAGR in PAT to | 428 crore.
�� Adjusted NII grew 48%, reported NII at 180%...
The bank reported an NII of | 221 crore against | 79 crore in
Q4FY10. In Q4FY10, the bank accounted for | 71 crore of tax outgo
for FY10 in the single quarter of Q4FY10. NIM for FY11 stood at
3.1% against 3% in 9MFY11, which came as a positive surprise. We
expect some moderation in NIM in FY12E while it should pick up
again in FY13E to ~3%.
�� …CASA ratio declines QoQ but not a major concern area
Even though the CASA ratio stood at 21.5% against 22.5% in
Q3FY11, the bank managed to improve its NIM. This shows the
pricing power of the bank. This phenomenon is also supported by
~13% of low cost NRE deposits of the total deposits of the bank. We
see a stable share of low cost deposits till FY13E.
�� Asset quality - no concerns as of now
The bank is one of the best in terms of asset quality with reported
GNPA@1.1% and NNPA@0.3%. SIB witnessed an improvement in
asset quality even in actual terms QoQ. The restructured portfolio
stands at | 551 crore (2.6% of portfolio) and it has a healthy PCR of
74%. We expect asset quality to be stable in the coming period.
Valuation
The stock is currently trading at 1.1x FY13E ABV at the CMP of | 22. The
bank has delivered RoA of 1.1% backed by a strong performance on the
core business and asset quality front. It also plans to add 60 more
branches in FY12, which will further strengthen its growth endeavour. We
expect SIB to deliver RoA of 1%, RoE of 20% (without factoring any
dilution) and stable asset quality with NNPA of 0.3%. We recommend
BUY on the stock with a target price of | 26 (valued at 1.3x FY13E ABV).
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