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S t e l l a r p r o f i t g r o w t h b ac k e d b y s t r o n g N I I …
South Indian Bank’s (SIB) Q2FY12 results reflect strong business growth
of 31% YoY (advances growth primarily driven by gold loan portfolio) and
NIM bouncing back sequentially to 3% leading to 26% QoQ growth in NII.
Even though other income remained flat QoQ at | 53 crore due to dismal
fee income and opex and provisions were higher QoQ, SIB recorded its
highest ever profit of | 95 crore (our estimate: | 83 crore). Asset quality
continues to be stable with GNPA ratio at 0.99% and NNPA ratio at
0.25%. The bank aims to reach a business size of | 1 lakh crore by FY14E
growing at 25% in FY12E and FY1Y13E and ~27% in FY14E. We expect
22% CAGR in business to boost PAT by 21% over FY11-13E.
ƒ Deposit growth healthy, gold loan key driver for loan growth...
Deposits grew 32% YoY to | 33,038 crore with CASA ratio at 21.3%.
SIB expects to maintain its CASA ratio at 21.5-22% and total low
cost deposits including CASA at 30% in FY12E. The bank is focusing
on higher flows in its NRI deposits given the depreciation in the
rupee. Advances grew 29.9% YoY (3.9% QoQ) to | 23,017 crore
with rapid expansion of its gold portfolio (up ~83% YoY to | 6100
crore). SIB’s gold loans have tenure of 12 months and high yields of
~12.5%, which enables frequent repricing boosting NIM. Moreover,
the bank has sanctions worth | 3000 crore that is yet to be
disbursed. We expect deposits and advances to grow at a CAGR of
22% and 23% over FY11-12E, respectively.
ƒ NIM improves 17 bps QoQ to 3%, NII rises 26% QoQ…
Margins moved back to 3% after two quarters as YoA rose 119 bps
QoQ to 12.94% while CoD was up only 15 bps QoQ to 7.75%.
Consequently, NII grew 31% YoY (26% QoQ) to | 258 crore against
our estimate of | 217 crore. Even though the bank has raised its YoA
while keeping deposit rates unchanged, we expect NIM to moderate
to 2.8-2.9% by the end of FY12E on account of sustained higher
costs.
V a l u a t i o n
SIB’s performance has been steady with strong business growth, healthy
margins and controlled asset quality. We expect SIB to deliver RoA of 1%,
RoE of 14% (post factoring dilution of | 945 crore). The bank plans to
raise capital when market conditions are conducive. Thus, we have
maintained our target price of | 26 (1.2x FY13E ABV).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
S t e l l a r p r o f i t g r o w t h b ac k e d b y s t r o n g N I I …
South Indian Bank’s (SIB) Q2FY12 results reflect strong business growth
of 31% YoY (advances growth primarily driven by gold loan portfolio) and
NIM bouncing back sequentially to 3% leading to 26% QoQ growth in NII.
Even though other income remained flat QoQ at | 53 crore due to dismal
fee income and opex and provisions were higher QoQ, SIB recorded its
highest ever profit of | 95 crore (our estimate: | 83 crore). Asset quality
continues to be stable with GNPA ratio at 0.99% and NNPA ratio at
0.25%. The bank aims to reach a business size of | 1 lakh crore by FY14E
growing at 25% in FY12E and FY1Y13E and ~27% in FY14E. We expect
22% CAGR in business to boost PAT by 21% over FY11-13E.
ƒ Deposit growth healthy, gold loan key driver for loan growth...
Deposits grew 32% YoY to | 33,038 crore with CASA ratio at 21.3%.
SIB expects to maintain its CASA ratio at 21.5-22% and total low
cost deposits including CASA at 30% in FY12E. The bank is focusing
on higher flows in its NRI deposits given the depreciation in the
rupee. Advances grew 29.9% YoY (3.9% QoQ) to | 23,017 crore
with rapid expansion of its gold portfolio (up ~83% YoY to | 6100
crore). SIB’s gold loans have tenure of 12 months and high yields of
~12.5%, which enables frequent repricing boosting NIM. Moreover,
the bank has sanctions worth | 3000 crore that is yet to be
disbursed. We expect deposits and advances to grow at a CAGR of
22% and 23% over FY11-12E, respectively.
ƒ NIM improves 17 bps QoQ to 3%, NII rises 26% QoQ…
Margins moved back to 3% after two quarters as YoA rose 119 bps
QoQ to 12.94% while CoD was up only 15 bps QoQ to 7.75%.
Consequently, NII grew 31% YoY (26% QoQ) to | 258 crore against
our estimate of | 217 crore. Even though the bank has raised its YoA
while keeping deposit rates unchanged, we expect NIM to moderate
to 2.8-2.9% by the end of FY12E on account of sustained higher
costs.
V a l u a t i o n
SIB’s performance has been steady with strong business growth, healthy
margins and controlled asset quality. We expect SIB to deliver RoA of 1%,
RoE of 14% (post factoring dilution of | 945 crore). The bank plans to
raise capital when market conditions are conducive. Thus, we have
maintained our target price of | 26 (1.2x FY13E ABV).
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