MOSL: SOUTH INDIAN BANK (Buy)- Weak quarter-elevated provisioning to remain an overhang
South Indian Bank: Weak quarter; elevated provisioning to remain an overhang
(SIB IN, Mkt Cap USD0.4b, CMP INR14, TP INR18, 28% Upside, Buy)
- PAT was down 38% YoY to INR705m in 4QFY19 owing to a 4% QoQ decline in NII. Fresh slippages came in at INR3.68b, led by agri slippages of ~INR1b (+77% YoY) and downgrade of one corporate account (INR1.14b). For FY19, NII grew by 2.8%, while PPoP/PAT declined by 16%/26%.
- Advances increased 15% YoY/4% QoQ, led by 31% YoY growth in retail loans, while corporate loans grew at a tepid 5% YoY. Corporate/SME book now comprises 34%/24% of total advances.
- NII growth, thus, stood modest at 1.5% YoY, which, coupled with strong treasury profits of INR650m (INR130m in 4QFY18), drove 10% YoY growth in total revenue. Margin shrank 20bp QoQ to 2.46%, as the bank was unable to pass on the MCLR increase to its borrowers.
- Fresh slippages at INR3.68b (2.7% annualized) drove a 6.9%/3.0% QoQ increase in GNPLs/NNPLs. Calculated PCR improved 257bp QoQ to 30.9% (42.5% including TWO) and the bank suggested for elevated provisions, as it aspires to achieve 60% provisioning coverage. SIB has INR4b of exposure toward IL&FS, on which it carries 15% provision.
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.
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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