South Indian Bank soars 13%, hits 6-year high on healthy Q3 results

Shares of South Indian Bank (SIB) hit a six-year high of Rs 31.93 as they soared 13 per cent on the BSE in Thursday's intraday trade amid heavy volumes. The surt came after the lender reported a strong set of earnings for the December quarter of FY24 (Q3FY24) marked by improvement in assets quality. The stock of the private sector lender was trading at its highest level since January 2018. It had hit a record high of Rs 34.75 on January 9, 2018.

At 02:23 PM, SIB was quoting 8 per cent higher at Rs 30.54 as compared to 0.55 per cent decline in the S&P BSE Sensex at 71,110. Average trading volumes on the counter jumped more than two-fold today with a combined 262 million equity shares of South Indian Bank having changed hands on the NSE and BSE till the time of writing of this report.

In Q3FY24, SIB's standalone profit after tax (PAT) more than doubled to Rs 305 crore on higher non-interest income. The bank had posted PAT of Rs 103 crore in Q3FY23.

Net interest income of the bank declined 1 per cent year on year (Y-o-Y) to Rs 819 crore, while total income jumped 61 per cent to Rs 1,271 crore. Net interest margin (NIM) stood at 3.19 per cent as against 3.52 per cent in the year-ago quarter and 3.31 per cent in the previous quarter.

The bank's operating profit during the period under review increased by 138 per cent to Rs 483 crore from Rs 203 crore in Q3FY23.

Besides, the bank's gross non-performing asset came down by 74 basis points (bps) from 5.48 per cent to 4.74 per cent on Y-o-Y basis. The bank's NNPA, too, dropped by 65 bps from 2.26 per cent to 1.61per cent on Y-o-Y basis. Capital adequacy of the bank stood at 15.60 per cent in December 2023.

The management said, during the period, the bank registered growth in all the desired segments with a focus on quality asset across all verticals Corporate, SME, Auto Loan, Credit Card, Personal Loan, Gold Loan etc.

Meanwhile, on December 27, 2023, the Board of SIB had approved the proposal to raise funds up to Rs 1,750 crore by way of issue of equity shares of the bank, on a right basis, to its existing eligible shareholders as on the record date, which will be fixed in due course.

In the last three years, SIB has come a long way and analysts believe the ongoing transformation journey should re-accelerate under Seshadri. Notwithstanding some pressure on near-term NIMs, they see stable FY25 YoY NIMs aided by favourable mix and low LDR (loan-to-deposit ratio).

"We believe the ongoing transformation journey should regain pace under the current MD & CEO Seshadri. He has been instrumental in putting new-age lending practices, overhauling risk architecture and transforming HR practices at Karur Vysya Bank during his term (2017–2020) – a time when the banking system was undergoing severe profitability pressure due to asset quality cycle," analysts at ICICI Securities had said in its September quarter results update.