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B u s i n e s s g r o w t h s t r o n g , m a r g i n s d i p …
South Indian Bank (SIB) maintained NIM of 2.8% for Q1FY12, despite a
103bps QoQ rise in cost of funds to 7.6%. This coupled with 36% YoY
growth in deposits lead to 17% QoQ growth in interest expense to | 564
crore (ahead of our estimates). This resulted in | 205 crore of NII (less
than our estimate of | 221 crore) and PAT of | 82 crore met our
expectations. The business growth was healthy 34% YoY at | 53773
crore, and expect 23% CAGR over FY11-13E to | 76228 crore. This aims
to reach 700 branches (634 currently) by FY12E, to support growth plans.
ƒ Strong deposit growth, fall in CASA leads to rise in cost of funds
Term deposits grew by 42% YoY, 7% QoQ to | 24833 crore. This led
to a fall in CASA ratio to 21.5%. This along with 6% NRE deposits
form 27% low cost deposits for the bank. This enables them to
contain cost of funds and maintain NIM in the range of 2.8-3% on a
sustainable basis. The interest rate scenario is expected to remain
firm in near future which will pressurise CASA deposits. We expect
NIM of 2.9% supported by 28-29% low cost deposits.
ƒ CAR healthy, fresh infusion well in sight
The bank plans to grow its business at stable 25% CAGR in coming
period. The bank last raised funds via QIP in September 2007. The
bank has signalled |1000 crore of fund raising through this route in
FY12 to support business growth. The reported CAR of 13.5%, with
Tier I at 10.9% and strong internal accruals makes growth targets
achievable.
ƒ Clean asset quality poses less stress
The bank has one of the best asset qualities with reported GNPA @
1.1% and NNPA @0.3%. The restructured portfolio stands at | 420
crore (1.9% of portfolio) and has a healthy PCR of 74%. We expect
asset quality to be stable in coming period as well.
V a l u a t i o n
The stock is currently trading at 1.1x FY13E ABV. We expect SIB to deliver
RoA of 1%, RoE of 14% (after factoring dilution of | 950 crore), and stable
asset quality with NNPA of 0.3%. The bank has kept opening of NBFC arm
for gold loans on hold and will move along with regulatory requirement.
We maintain our TP of | 26 (valued at 1.2x FY13E ABV) despite a rise in
book value because of lower RoE.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
B u s i n e s s g r o w t h s t r o n g , m a r g i n s d i p …
South Indian Bank (SIB) maintained NIM of 2.8% for Q1FY12, despite a
103bps QoQ rise in cost of funds to 7.6%. This coupled with 36% YoY
growth in deposits lead to 17% QoQ growth in interest expense to | 564
crore (ahead of our estimates). This resulted in | 205 crore of NII (less
than our estimate of | 221 crore) and PAT of | 82 crore met our
expectations. The business growth was healthy 34% YoY at | 53773
crore, and expect 23% CAGR over FY11-13E to | 76228 crore. This aims
to reach 700 branches (634 currently) by FY12E, to support growth plans.
ƒ Strong deposit growth, fall in CASA leads to rise in cost of funds
Term deposits grew by 42% YoY, 7% QoQ to | 24833 crore. This led
to a fall in CASA ratio to 21.5%. This along with 6% NRE deposits
form 27% low cost deposits for the bank. This enables them to
contain cost of funds and maintain NIM in the range of 2.8-3% on a
sustainable basis. The interest rate scenario is expected to remain
firm in near future which will pressurise CASA deposits. We expect
NIM of 2.9% supported by 28-29% low cost deposits.
ƒ CAR healthy, fresh infusion well in sight
The bank plans to grow its business at stable 25% CAGR in coming
period. The bank last raised funds via QIP in September 2007. The
bank has signalled |1000 crore of fund raising through this route in
FY12 to support business growth. The reported CAR of 13.5%, with
Tier I at 10.9% and strong internal accruals makes growth targets
achievable.
ƒ Clean asset quality poses less stress
The bank has one of the best asset qualities with reported GNPA @
1.1% and NNPA @0.3%. The restructured portfolio stands at | 420
crore (1.9% of portfolio) and has a healthy PCR of 74%. We expect
asset quality to be stable in coming period as well.
V a l u a t i o n
The stock is currently trading at 1.1x FY13E ABV. We expect SIB to deliver
RoA of 1%, RoE of 14% (after factoring dilution of | 950 crore), and stable
asset quality with NNPA of 0.3%. The bank has kept opening of NBFC arm
for gold loans on hold and will move along with regulatory requirement.
We maintain our TP of | 26 (valued at 1.2x FY13E ABV) despite a rise in
book value because of lower RoE.
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