South Indian Bank

1. GNPA -10 basis points down QoQ, NNPA 13 basis points down QoQ, Special Mention Account -2 goes down from 0.7% of advances to 0.6% of advances.
2. NIM comes down 2 basis points to 3.24%. CEO says it is mainly on account of certain charges taken out of financial income and placed it in other income. There are no material changes. Provision Coverage increases marginally and CASA comes down marginally.
3. RoA is at 1.07% and RoE is at 13.71% after all the dilution.

Mr. Market thinks it is not good enough and it should trade at 0.7 of book value and below the adjusted book!!

Mortgage loans, Home loans and Credit cards grew aggressively. Credit card is just 7% of AUM; Personal loan is 11%.

YoY growth in advances is 14%. The Bank wants to keep Credit – Deposit ratio at the current level as aggressive deposit growth and a decrease in C-D ratio can increase the cost of funds.

What is that the market is discounting?
Mr Market does not seem yet to be convinced by the change in underwriting practices in the Bank. Also, my guess is that the market is estimating that NIM can come down as RBI reduces the repo rates. But can it bring down the NIM to a scenario where the RoE is severally down? One cannot know but at the moment it looks unlikely. I think it is at a discount, but you never know!