South Indian Bank Review - Steady Q4 With ~1.0% RoA Aided By Better NIM, Contained Opex: ICICI Securities

ICICI Securities Report

South Indian Bank Ltd. has reported Q4 FY24 profit after tax of Rs 2.9 billion (return on asset of 0.98%), aided by higher net interest margin and contained opex, while asset quality sustained improvement. Despite rise in cost of deposits, NIM jumped ~19 bps QoQ to 3.38%, driven by rise in yields. Post the recent rights issue, CET 1 stands strong at 16.66% with tier 1 at 17.65%.

South Indian Bank aims for significant loan mix change in favour of granular retail and SME loans over the next 18-24 months. It has introduced affordable housing, commercial vehicle/construction equipment and loan against property in Q4, though current loan growth still remains driven by short-term, high-quality corporate segment.

Our estimates are broadly unchanged and we see the bank delivering 85/95 bps RoA in FY25/26E, respectively. Valuations at 0.9/0.8 times FY25/26E adjusted book value are in-expensive. Maintain Buy with a revised target price of Rs 34.

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