Anand Rathi Securities has recommended a "Buy" on South Indian Bank (SIB).Anand Rathi Securities, in its report, states that South Indian Bank, a leading bank in the south, has shown consistency in its operating performance in the current year also with net interest income growing by 20.7% to Rs 310 crore over and above the 28% growth witnessed in the previous year.Net profit has risen by almost five times (485%) as against a fall witnessed in the previous year. While weighted EPS has increased to Rs 10.25 from Rs 1.82 in the previous year, EPS on expanded equity works out to Rs 7.23.It has been able to significantly bring down its NPA from a high of 2.5% in the previous year to 1.86%, which has been the main drainer on the net profit last year. The management is confident of brining down NPA levels to below 1% in FY07 and to 0% level in FY08.With provisioning relating to treasury operations already accounted for in the current year and no left over in terms of provisioning for VRS scheme, the asset-related provisioning items in the current year would be down to minimum level thus boosting profits in the current year.A strong 12.8% growth in deposit (with low cost deposit improving to 25% of total deposit as against 20% in last year) and a 18.8% growth in advances have improved margins significantly.Expansion of branch network in the northern parts and new found ways of improving the fee-based income would help the bank further.Also with FIIs taking a significant exposure in the stock, it is expected to get better discounting in the future.
