South Indian Bank - Q2FY14 Result Review - Angel Broking

South Indian Bank delivered better than expected earnings performance; however, asset quality witnessed continued pressures. On the operating front, Net Interest Income for the bank grew at a healthy pace of 22.3% yoy, while non-interest income de-grew by 15.5% yoy (after providing for MTM loss of ~Rs. 20cr), leading to growth of 14.9% yoy in operating income. Operating expenses grew much higher than expectations by 25.0% yoy and hence, growth in pre-provisioning profit was capped at 6.2% yoy. On the asset quality front, the bank witnessed continued weakness, as the absolute Gross and Net NPA levels, increased by 24.7% and 26.2% respectively. The provisioning expenses de-grew by 64.7%, which enabled the bank to clock earnings growth of 30.5% yoy.

During the last few quarters, the asset quality for the bank has witnessed pressures. Hence given the weak macro environment we remain cautious on stock. At the CMP, the stock is trading at 0.8x FY2015E ABV. We recommend a Neutral rating on the stock.

Source : Equity Bulls

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