Motilal Oswal - South Indian Bank Ltd. (SOUTHBANK) MOSL: SOUTH INDIAN BANK (Buy)-Modest operating performance-lower provisions drive earnings

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Motilal Oswal

Nitin Aggarwal

MOSL: SOUTH INDIAN BANK (Buy)-Modest operating performance-lower provisions drive earnings

SOUTH INDIAN BANK: Modest operating performance; lower provisions drive earnings

(SIB IN, Mkt Cap USD0.4b, CMP INR15, TP INR20, 37% Upside, Buy)

SIB reported 2QFY19 PAT of INR0.8b (1QFY19: INR0.2b), supported by controlled provisions of INR2.1b (-55% YoY), even as PPoP declined 32% YoY (muted treasury gains). Our full-year estimate suggests SIB should deliver PAT of INR1.7b in 2HFY19 (after INR0.9b in 1HFY19).
NII stood flat even as advances increased 16% YoY. Margins also held flat at 2.6%. Loan growth of 16% YoY was led by robust growth in retail (+19% YoY) and MSME (+7.2% YoY) loans, while corporate book grew 13% YoY. Deposits grew by 12% YoY, while the CASA ratio stood at 24.6%.
Inspite of opex growth of 10% YoY led by higher employee expenses (+17% YoY) ; CI ratio declined to 53.4% (57.9% in 1QFY19).
Slippages declined sharply to INR2.1b (INR6.1b in 1QFY19), which included SME slippages of INR1.1b. Absolute GNPA increased 3.7% QoQ to INR26.5b (4.6%, +7bp QoQ). NNPA declined 1.6% QoQ to INR17.8b (3.16%, -11bp), with calculated PCR improving to 32.6% (+363bp QoQ). Total NSL were at INR20.4b (3.6% of total loans).
Other highlights: (a) SMA-2 stands at INR23.7b (4.12%). (b) Bank made provision of INR0.2b toward the infra group (total exposure INR4b). (c) Bank guided for slippage of INR5b from SME and retail over 2HFY19.

17/10/2018 10 EN

Underlying

South Indian Bank Ltd.

South Indian Bank Limited. The South Indian Bank Limited (the Bank) provides retail and corporate banking, Para banking activities, such as debit card, third-party product distribution, in addition to Treasury and Foreign Exchange Business. The Bank's segments include Treasury, Corporate/Wholesale Banking, Retail banking and Other Banking Operations. The treasury services segment consists of interest earnings on investments portfolio of the Bank, gains or losses on investment operations and earnings from foreign exchange business. The Corporate/Wholesale Banking segment provides loans to corporate segment. The Retail Banking segment provides loans to non-corporate customers. The Other Banking Operations segment includes income from para banking activities, such as debit cards, third-party product distribution and associated costs. The Bank has a network of approximately 830 branches, approximately 40 extension counters and approximately 1,290 automated teller machines (ATMs) in India.

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INE683A01023 National Stock Exchange of India India

Provider

Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Analysts

Nitin Aggarwal

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MOSL: SOUTH INDIAN BANK (Buy)-Modest operating performance-lower provisions drive earnings

Increased risk weighs on SOUTH INDIAN BANK, penalising its rating down to Neutral

MOSL: SOUTH INDIAN BANK (Buy)-In-line operating performance-Asset quality broadly stable

MOSL: SOUTH INDIAN BANK (Buy)- Weak quarter-elevated provisioning to remain an overhang

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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