South Indian Bank (SIB IN) - Earnings update - PAT declined owing to exceptional provision - CSEC Research

PAT declined owing to exceptional provision

- SIB's Loan book grew steadily (11.9%YoY, 5.2%QoQ) to INR 497.2bn in 2QFY18 led by growth in Retail (22.3%YoY, 2.6%QoQ) and SME & Agriculture (16.2% YoY, 10.6% QoQ) segments. In-line with past management commentary, corporate book remained in consolidation mode (grew 1.9% on a sequential basis). Management has guided to grow its overall loan book at ~18% in second half of FY18, primarily lead by retail and SME segment.

- Growth in retail segment was led by Service and Traders segment (34.6%YoY) & Manufacturing segment (31.4%YoY) whereas Gold loan showed de-growth of 7.8% YoY. Management continues to focus on segments like Retail, SME & Agri and is looking to avoid large ticket size consortium lending.

- Deposits grew (11.5%YoY, -2.1%QoQ) to INR 671bn supported by growth in Current account (23.3%YoY) & Savings deposits (19.7%YoY). Overall CASA registered a growth of (20.3%YoY), though the share of CASA declined marginally from 25.2% in 1QFY18 to 24.6% this quarter. The bank expects 27% growth in deposits over FY18.

Valuation:

The bank continues to shift its focus from corporate loans towards Retail & SME loans which would help them contain the credit costs and maintain the margins at healthy level. The Stock currently trades at 0.9x PBV of FY19E. We maintain our BUY rating for the stock and the target price at INR 36, implying a 1.2X P/B FY19E.

Shares of SOUTH INDIAN BANK LTD. was last trading in BSE at Rs.32.4 as compared to the previous close of Rs. 31.35. The total number of shares traded during the day was 3704376 in over 6418 trades.

The stock hit an intraday high of Rs. 32.95 and intraday low of 31.25. The net turnover during the day was Rs. 119189946.

Source : Equity Bulls

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