“South Indian Bank (SIB) management expects to achieve business growth of 25-28% YoY to Rs 480-500 billion in FY11. Loans are expected to grow 25%+ YoY to Rs 200 billion and deposits 23%+ YoY to Rs 280 billion. We expect loans to grow 25% YoY and deposit to grow 24% YoY in FY11. FY13 business target of Rs 750 billion, 750 branches and ATM and 7,500 employees remains intact. The management remains confident of achieving its targets ahead of schedule. As of 1QFY11, loans grew 5% QoQ and 34% YoY to Rs 169 billion while deposits grew 1% QoQ and 25% YoY to Rs 233 billion. Gold loans, SME and Corporate loans will remain key drivers of loan growth going forward.”
“Management expects to maintain CASA growth in line with overall deposits growth and CASA ratio is expected to remain stable at ~25%. However, in 1QFY11, CASA growth of 28% YoY outpaced overall deposits growth. CASA ratio had improved to 25.1% versus 23.3% for FY10 and 24.5% for 1QFY10.”
“SIB has shown consistent improvement in its operating performance. We expect its ROAs to sustain at ~1% whereas increase in leverage would help drive ROEs to ~18% by FY12E. SIB is planning to add 60 new branches to its existing network of 580 branches. Of this, roughly 30 would be in southern India (without RBI license requirement) which would further strengthen its presence in that region. Stock trades at FY12 P/BV of 1.6x and PE of 9.4x. Maintain Buy,” says Motilal Oswal research report.
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