South Indian Bank -Gold loan drives performance ACCUMULATE ::Emkay,

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South Indian Bank

Gold loan drives performance

ACCUMULATE

CMP: Rs23                                        Target Price: Rs27

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n     SIB’s Q2FY12 earnings at Rs950mn ahead of expectation led by higher than expected NII growth

n     The NII grew by 31.1% to Rs2.6bn led by strong ~19%qoq growth in gold loan portfolio, and 20bps qoq expansion in NIM’s to 3%

n     High concentration of gold loan at 26% of the book, a concern. In case of any slowdown in gold loan book growth, rest of the book need to grow at more than 25%

n     Lowering earnings by 7.1/8.1% each for FY12/13 for higher opex and prov cost. Maintain ACCUMULATE with revised TP of Rs27