South Indian Bank Q3FY15 Results Reports By Motilal Oswal, Angel Broking & Prabhudas Liladhar

Motilal Oswal:

While slippages increased QoQ, sequential decline in fresh restructuring restricted overall stress additions during the quarter. SIB continues to focus on improving the recovery and diversify the loan mix, which will aid earnings in the ensuing quarters. While earnings growth will be weak in FY15, improvement in loan growth and asset quality to lead to core PPP and earnings CAGR of 29%/21% over FY15E/17E. RoA to improve to 0.9% and RoE to improve to 15% by FY17E. Maintain Buy with a target price of INR37 (1.1x FY17E BV of INR32.5).

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Angel Broking:

Asset quality issues continued to linger during the quarter. With an improvement in the macro-economic environment, the bank expects the Gross NPA ratio to stabilize at current levels. Currently the stock trades at 1.0x FY2016E ABV. With negatives factored in lower valuations, we recommend an Accumulate rating on the stock with a price target of Rs. 32.

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Prabhudas Liladhar:

SIB’s Q3FY15 numbers came in below expectations with PAT at Rs879mn (~38% YoY decline) despite strong treasury gains. Core performance was disappointing on weak NIMs, fees and opex. Asset quality slipped on higher deliquencies belonging to infrastructure, tyre and metal segments and resulted in interest reversal of Rs380mn. CASA mix also deteriorated by 60bp QoQ to 21.5% as current account deposits declined on sequential basis. Management has suggested for stable trends in asset quality going ahead. We retain our BUY rating with PT of Rs35.

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