South Indian Bank

South Indian Bank Ltd

BUY

- 1 of 16 - Monday 14th July, 2014

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.

ST

OC

K P

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Target Price `45 CMP `33 FY16E Adj PBV 1.5x

Index Details We initiate coverage on South Indian Bank (SIB) with a BUY

recommendation and a Price Objective of `45 (target Adj P/BV multiple of 1.5x) implying a potential upside of ~37%. At the CMP of `33, the stock is trading at an Adj P/BV of 1.3x and 1.1x for FY15E and FY16E, respectively. With the new government stepping-up reforms and making efforts to remove the bottlenecks in the economy, we expect the economic growth to pick up going forward. Consequently, we expect the strong growth momentum seen in SIB over past few years to continue. We expect advances and deposits to grow at a CAGR of ~19% each over the forecasted period of FY14-16E. With business further expected to grow at CAGR of 19.5% over FY14-16E; NIMs remaining stable at ~3.0% and cost-to-income ratio improving to ~45% (currently ~50%), we expect a robust

PAT growth of 22.6% CAGR over FY14-16E to `763 crore. Asset quality of SIB has improved in FY14 with GNPA and Net NPA standing at 1.2% and 0.8% in FY14 against 1.4% and 0.8% in FY13, respectively (which compares favourably with peers).

On the capital adequacy front, SIB is comfortably placed to support the future business needs of the bank over the period FY14-16E. The management has stated that it does not require any Tier-I capital funding during the current year. However, it

plans to raise Tier-II capital of `200 crore in FY15 to fund future growth. Robust advances growth over FY14-16E with focus on retail,

SME & Agri lending

SIB has witnessed robust advances growth of CAGR of 25.1% over the period

FY09-14, spearheaded by growth from the corporate sector. However, with the

economy coming to a standstill over the last couple of years, SIB slowed down

lending to corporate segment.

Sensex 25,007

Nifty 7,454

BSE 100 7,534

Industry Banking

Scrip Details

Mkt Cap (` cr) 4,435

BVPS (`) 24.0

O/s Shares (Cr) 134.6

Av Vol (Lacs) 59.8

52 Week H/L 35/19

Div Yield (%) 2.5

FVPS (`) 1.0

Shareholding Pattern

Shareholders %

Promoters 0.0

DIIs 12.0

FIIs 41.7

Public 46.3

Total 100.0

SIB vs. Sensex

Key Financials (` in Cr)

Y/E Mar Net

Interest Income

Non Interest Income

PAT EPS Adj. BV PE (x) P/Adj. BV (x)

ROA (%)

ROE (%)

2013 1,280.8 334.9 502.3 3.8 20.6 8.8 1.6 1.1 19.4

2014 1,398.8 368.5 507.5 3.8 23.0 8.7 1.4 1.0 15.9

2015E 1,726.3 442.2 632.8 4.7 26.0 7.0 1.3 1.1 17.4 2016E 1,994.3 530.6 763.2 5.7 30.1 5.8 1.1 1.1 18.2



To mitigate this loss of business from corporate loans, SIB has been concentrating

on the Retail / SME & Agri lending. The management is aiming for 60% contribution

of the total loan portfolio from this segment by FY16 as compared to 50% at end of

FY14. To cater to this new growth thrust, SIB has set up a separate profit center to

concentrate on housing, auto and retail loans which are the pivotal sub segments.

We expect overall advances to grow at a CAGR of 19.5% to `51,736 crore by

FY16E.

Robust deposit growth to continue; CASA to witness significant

traction

Over FY09-14, deposits have grown at a CAGR of 21.3% and we expect this brisk

pace of growth to be maintained over the forecast period. With SIB planning to add

50 new branches every year and taking initiatives like priority banking (80 centres)

and NRE banking (NRE/NRO) CASA deposits are expected to grow at a faster clip

of 31.4% which should help boost CASA ratio to 25% (from the current 20.7%) by

FY16. This in turn should help bring down cost of deposits. Overall we expect total

deposits to grow at a CAGR of 19.5% to `67,817 crore by FY16E.

Stable asset quality is an added comfort

In this adverse economic scenario, where most of the banks are suffering from asset

quality issues, SIB with 1.2% GNPA and 0.8% NNPA in FY14 is better placed than

most peers in terms of the asset quality. With a slew of measures being undertaken

to improve asset quality and the overall economic environment also expected to

improve, we do not expect any further aggravation in the asset quality

Valuation

We initiate coverage on South Indian Bank with a BUY recommendation and a Price Objective of `45 (target Adj P/BV multiple of 1.5x) implying a potential upside of ~37%. At the CMP of `33, the stock is trading at an Adj P/BV of 1.3x and 1.1x for

FY15E and FY16E, respectively.



Company Background

Incorporated in 1929, South Indian Bank (SIB) is a leading mid-sized bank in the private sector space. It operates a network of ~800 branches and ~1000 ATMs. With about half of its branches located in Kerala, SIB’s business is largely skewed towards the Southern state. The bank is looking to maintain a geographic spread (1:1 Kerala: outside Kerala) and expand its pan-India foot-print. The total business done has scaled to `83,721 in FY14 at a CAGR of 29.3% over a five year period, spearheaded by the strong brand recall it enjoys among the Keralite NRI diaspora. SIB is among the better capitalized banks in the industry with a total CAR of 12.5%. Gross NPAs were reported at 1.2% with provision coverage ratio of 62.7%.

South Indian Bank – Loan Portfolio

Source: SIB, Ventura Research

(Rs 36,230 cr in FY14)



Key Investment Highlights

Robust advances growth over FY14-16E with focus on retail

and SME & Agri lending

SIB has witnessed robust advances growth with a CAGR of 25.1% over the period FY09-14 spearheaded by corporate sector lending. However, with the economy coming to a standstill over the last couple of years, SIB slowed down lending to the corporate segment. To mitigate this loss of business from corporate loans, SIB has been concentrating on the Retail / SME & Agri lending. The management is aiming for 60% contribution of the total loan portfolio from this segment by FY16 as compared to 50% at end of FY14. To cater to this new growth thrust SIB has set up a separate profit center to concentrate on housing, auto and retail loans which are the pivotal sub segments We expect overall advances to grow at a CAGR of 19.5% to `51,736 crore by FY16E.

Robust deposit growth to continue; CASA to witness

significant traction

Over FY09-14, deposits have grown at a CAGR of 21.3% with term deposits growing at a CAGR of 22.3% while demand deposits and savings deposits have clocked a growth of 17.4% and 18.1% respectively. SIB is taking initiatives like priority banking (80 centres) and NRE banking (NRE/NRO savings bank deposits constitute 20% of the total CASA of SIB) to improve the CASA ratio currently at 20.7%. This is expected to spearhead faster CASA growth (of 31.4%) over FY14-16E, while the CASA ratio to improve to 25%

Advances to grow at CAGR of 19.5% Advances Break-up Trend

0%

5%

10%

15%

20%

25%

30%

35%

0

10000

20000

30000

40000

50000

60000

FY11 FY12 FY13 FY14 FY15E FY16E

Rs Crore

Advances Growth (RHS)

0

10000

20000

30000

40000

50000

60000


Rs.Crore

Corporate Retail and SME & Agri





(from the current 20.7%) by FY16. This should help bring down cost of deposits. SIB is expected to add 50 branches and more than 100 ATMs every year over the next couple of years. As can be seen in the chart, SIB has further scope of improvement in CASA as compared to similar sized banks.

We expect total deposits to grow at a CAGR of 19.5% to `67,817 crore by FY16E.

Growing contribution from CASA accounts Scope for improvement in CASA as compared to peers

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

10000

20000

30000

40000

50000

60000

70000

80000


Rs.Crore

Term Deposit CA SB CASA Ratio (RHS)

15

30.8133.4

25.4

20.6 20.7

0

5

10

15

20

25

30

35

40

CUB Federal ING Vysya Karnataka Karur Vysya

SIB

(%)



Deposits to grow at CAGR of 19.5% Branch Expansion ahead

0%

5%

10%

15%

20%

25%

30%

35%

0

10000

20000

30000

40000

50000

60000

70000

80000


Rs Crore

Deposits Growth (RHS)

641700

750800

850900

0

100

200

300

400

500

600

700

800

900

1000


Nos.





Profitability to improve on the back of high NII growth, stable

NIMs and improvement in cost to income ratio

SIB has registered a robust profit growth of 20.2% CAGR over the period FY11-14

on the back of robust business growth seen over the same period (CAGR of 18.6%).

With business further expected to grow at CAGR of 19.5% over FY14-16E and NIMs

remaining stable at ~3.0% and cost-to-income ratio improving to ~45%, we expect a

robust PAT growth at 22.6% CAGR over FY14-16E. Return ratios ROE and ROA

are also expected to improve to 18.2% and 1.1%, respectively.

NII to clock a CAGR of 19.4% over FY14-16E

Robust advances growth and deposit growth has helped SIB register NII growth of

20.9% over FY11-14. With robust growth in advances expected to continue and

contribution from retail rising, we expect NII growth to sustain at a CAGR of 19.4% to

`1,989 crore over FY14-16E.

Stable NIMs and lower cost to income to boost profitability

Despite sluggish economic growth, SIB has managed to maintain NIMs at ~3.0%. Going forward, we expect the NIMs to remain stable above 3.0% with renewed focus on the growth of higher yielding retail business and thrust on mobilization of low cost CASA deposits. The cost-to-income ratio for SIB had deteriorated from 47.5% in FY13 to 50.0% in FY14 due to higher provision for wages according to IBA guidelines (most of which has already been accounted for). Also, out of 50 new branches to be added this year, 25 branches will be full-fledged branches and remaining will be extension

NII Quarterly Trend NII to grow at a CAGR of 19.2%

0

50

100

150

200

250

300

350

400

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13

Q1F

Y14

Q2F

Y14

Q3F

Y14

Q4F

Y14

Rs.Crore

0

500

1000

1500

2000

2500

FY

11

FY

12

FY

13

FY

14

FY

15E

FY

16E

Rs.Crore





counters which have lower operating costs. According to RBI guidelines, 25% of the new branches have to be opened in the rural and un-banked areas, which will have lower operating costs. This is expected to improve the C/I ratio by 515 bps to 44.8% by FY16 With stable NIMs and lower cost-to-income ratio going forward, we expect profitability to improve to Rs 763 crore. As a result ROE is expected to improve from 15.9% in FY14 to 17.0% in FY16.

NIM and Cost to Income-Quarterly Trend NIM and Cost to Income Annual Trend

3.0%

3.1%

3.1%

3.1%

3.1%

3.1%

3.2%

3.2%

3.2%

3.2%

0%

10%

20%

30%

40%

50%

60%

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13

Q1F

Y14

Q2F

Y14

Q3F

Y14

Q4F

Y14

(%)

Cost to Income NIM (RHS)

2.8%

2.9%

2.9%

3.0%

3.0%

3.1%

3.1%

3.2%

3.2%

42%

43%

44%

45%

46%

47%

48%

49%

50%

51%

FY

11

FY

12

FY

13

FY

14

FY

15E

FY

16E

(%)




Yield on Adv and Cost of Dep Quarterly Trend Yield on Adv and Cost of Dep Annual Trend

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Q4F

Y12

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13

Q1F

Y14

Q2F

Y14

Q3F

Y14

Q4F

Y14

Yield on Advances Cost of Deposits

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

FY

11

FY

12

FY

13

FY

14

FY

15E

FY

16E

Yield on Avg Advances Cost of Avg Deposits





Other income to reduce earnings volatility

SIB’s other income has grown at a CAGR of 17.5% over FY09-14. Going forward, we expect the same to grow at a 20% CAGR over next two years driven by the income from the card business and insurance commission business. SIB acts as a corporate agent for the distribution of insurance products of both LIC and Bajaj Alliance for life insurance and general insurance respectively. Further SIB has a tie-up with 13 leading Mutual Funds, and has also enrolled as a

NIM Cost to Income compares favorably with peers


47.8 47.7

64.0

54.257.6 55.6

3.3 3.6

3.7

2.42.7

3.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

CUB Federal ING Vysya

Karnataka Karur Vysya

SIB

(%)


Quarterly

45.2

49.3

57.0 56.1 54.750.0

3.5

3.3 3.5

2.42.6

3.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

CUB Federal ING Vysya

Karnataka Karur Vysya

SIB

(%)


Annually

Yield on Advances and Cost of Deposit comparison with peers


13.1

11.6 11.7 12.1 12.0 12.4

7.27.9

7.2 7.6 8.1 8.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0


SIB

(%)

Yield on Advances Cost of Deposit

Quarterly

13.4

11.411.6 12.2 12.3 12.4

7.48.6

7.37.9 8.2 8.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0


SIB

(%)

Yield on Advances Cost of Deposit

Annually



Channel Partner for the distribution of bonds issued by different companies. With an array of avenues to generate fee income, we expect it to grow at a CAGR of 20% to `531 crore by FY16E.

Stable asset quality is an added comfort

In this adverse economic scenario, where most of the banks are suffering from asset

quality issues, SIB with 1.2% GNPA and 0.8% NNPA in FY14 is better placed than

most peers in terms of asset quality. The provision coverage ratio improved from

53% in FY13 to 63% in FY14 and provides additional comfort. It is further expected

to improve to 67% in FY15.

GNPA of SIB has improved from 1.3% in FY13 to 1.2%, which under a worst case

scenario can increase to 1.3% in FY15. Net NPA has remained stable at 0.8% over

the past two years and can increase to 0.9% in FY15 in a worst case scenario. The

bank is taking prudent measures like reducing aggregator funding in the case of the

gold loans and approving gold loans for real end use (individual requirements and

small ticket size loans). Such measures will help it to keep the NPA in check in

future. The bank has also gone slow on infrastructure lending with infrastructure

constituting 14.3% of its total loan portfolio in FY14 as compared to 15.0% in FY13. SIB has recovered NPAs to the extent of `533 crore in FY14, (recovery including

upgradation of `301 crore), surpassing its target of `250 crore. The recovery during

FY14 also surpassed the recovery of `270 crore for FY13. The sustained thrust on

selection of credit, adequate due diligence and improvement in credit administration

ensured improvement in quality of assets.

SIB has also constituted a committee which meets once every quarter to review all

Other Income Quarterly Trend Other Income to grow at a CAGR of 20%

0

20

40

60

80

100

120

140

Q4F

Y12

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13

Q1F

Y14

Q2F

Y14

Q3F

Y14

Q4F

Y14

Rs. Crore

0

100

200

300

400

500

600

FY

11

FY

12

FY

13

FY

14

FY

15E

FY

16E

Rs.Crore





NPA Accounts above `50 lakh. Restructured assets of the bank currently stands at

`1725 crore which can further deteriorate to `1900 crore in the worst case scenario.

Comfortably placed to raise Tier-II capital for future growth With capital adequacy of 12.5% (Tier-I capital stood at 10.9%, while Tier-II capital stood at 1.6% in FY14), SIB is comfortably placed to support the future business needs during FY14-16E. The management has stated that it does not require any Tier-I capital funding during the current year. However, it plans to raise Tier-II capital of `200 crore in FY15 to fund future growth (The management has expressed

confidence that it can easily raise Tier-II capital upto `800 crore).

Asset Quality remaining Stable in challenging environment


0%

10%

20%

30%

40%

50%

60%

70%

80%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Q4F

Y12

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13

Q1F

Y14

Q2F

Y14

Q3F

Y14

Q4F

Y14

(%)

Gross NPA Net NPA PCR (RHS)

40%

45%

50%

55%

60%

65%

70%

75%

80%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

FY

11

FY

12

FY

13

FY

14

FY

15E

FY

16E

(%)

Gross NPA Net NPA PCR

Asset quality comparison with peers

Source: SIB, Ventura Research, RA: Restructured Assets

1.8

2.5

1.8

2.9

0.8

1.21.2

0.7

0.3

1.9

0.4

0.8

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


SIB

(%)

Gross NPA Net NPA

Annually

1.7%

5.5%

1.4%

5.6%

3.6%

4.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

CUB Federal ING Vysya Karnataka Karur SIB

CUB Federal ING Vysya Karnataka Karur SIB



For the current year, the bank is focusing on the retail segment, where risk weights are low as compared to the corporate book and current capital will be sufficient to fund the growth. The management expects Tier-I capital to be around 9.5% to 10%, by the end of FY15.

Return Ratios

SIB has been successful in maintaining healthy return ratios over the years given its strong track record. With the buoyant economic growth expected, we expect ROE to improve to 18.1% in FY16 as compared to 15.9% in FY14.

Tier-II capital infusion will be required for B/S growth


10.9%12.3% 11.8% 12.1% 11.9% 11.4% 10.7% 10.9%

2.3%

2.1%2.1% 1.9% 1.8% 1.8%

1.7% 1.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13

Q1F

Y14

Q2F

Y14

Q3F

Y14

Q4F

Y14

(%)

Tier I Tier II

11.3% 11.5% 12.0%10.9% 10.6% 10.1%

2.7% 2.5% 1.9%

1.6% 1.5% 1.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

FY

11

FY

12

FY

13

FY

14

FY

15E

FY

16E

(%)

Tier I Tier II

Capital Adequacy as compared to peers


14.5 14.6 14.6

10.8 11.6 10.9

0.6 0.6 2.1

2.5 1.2 1.6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0


SIB

(%)

Tier I Tier II

Quarterly

14.5 14.6 14.6

10.8 11.6 10.9

0.6 0.6 2.1

2.5 1.2 1.6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0


SIB

(%)

Tier I Tier II

Annually



Key Risks and Concerns

SIB has traditionally had major presence in southern India especially Kerala which houses almost 55% of its branches. However, going forward, as a strategy, SIB has set a target of having 50% branches outside Kerala. In FY15, SIB plans to open branches in Maharashtra, Gujarat and North-East India.

SIB has high exposure to gold loans which it is trying to bring down especially when it comes to gold aggregator lending. The exposure to total gold loans has come down to 14.3% in FY14 from 20.2% in FY13.

Financial Performance

In Q4FY14, SIB’s advances grew at 13.9% YoY (8.7%QoQ) to `36,230 crore amidst

contraction in retail advances (10.5% YoY, 0.3%QoQ). However, SME & Agri (38.6%YoY, 12.7%QoQ) and Corporate (16.2%YoY, 10.9%QoQ) supported loan growth. Consequently, the share of retail advances declined (600 bps YoY, 200 bps QoQ) to 22%, while the share of SME & Agri improved (500 bps YoY, 100 bps QoQ) to 28%. Decline in retail advances was led by de-growth in gold loans (29.4%YoY) and Vehicle loans (3%YoY), while housing loans continued to strengthen (24.2%YoY). Over the same period, deposits growth remained lacklustre at 7.3%YoY, (6.4%QoQ) at `47,490 crore amidst slower growth in CASA deposits (3.8% QoQ) at `9,830 crore. Consequently, the share of CASA deposits declined 50 bps QoQ at 20.7%, while the share of NRI deposits stood at ~25%.

NIM remained stable at 3.0% in the Q4FY14 owing to improvement in yield on advances (1 bps QoQ) and stable cost of funds. The management expects NIMs to remain stable at ~3% levels in FY15.

ROE and ROA Annual Trend ROA/ROE comparison with peers

0.9%

1.0%

1.0%

1.1%

1.1%

1.2%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%


ROE ROA (RHS)

CUB

Federal

ING Vysya

Karnataka

Karur Vysya

SIB

0.6

0.8

1

1.2

1.4

1.6

10 12 14 16 18 20

RO

A(%

)

ROE (%)





Asset Quality improved as absolute GNPA’s decreased (7.7% YoY, 29.4% QoQ) to `434 crore (1.2% of advances), whilst NNPA’s declined by 27.5% QoQ to `290 crore (0.8% of advances).

Cost to Income increased 199 bps QoQ to 49.9% led by higher wage cost. Hence, net profit declined (19% YoY, 11.8% QoQ) to `124 crore.

Financial Outlook

We expect NII to grow at a CAGR of ~21% over FY14-16E to `1,989 crore with NIM

improving to 3.1% (v/s 3.0% in FY14). PAT is expected to grow at ~22% CAGR over FY14-16E to `759 crore. On the balance sheet front, advances are expected to grow

at a CAGR of ~19% to `51,736 crore by FY16E, while deposits are likely to grow at a CAGR of ~19% to `67,817 crore over the same period.

Quarterly Financial Performance (` in crore)

Particulars Q4FY14 Q4FY13 FY14 FY13

NII (Net Interest Income) 364.7 333.7 1398.8 1280.8

Non

‐

interest income 96.6 121 368.5 334.9

Total income 461.3 454.7 1767.2 1615.8

Total Operating expenses 256.3 248.6 882.9 767.2

Pre provision opt profit 205.0 206.1 884.3 848.6

Provisions 28.3 65.9 155.4 192.7

Profit before tax 176.7 140.2 728.9 655.9

Tax 52.0 -13.6 221.4 153.6

PAT 124.7 153.8 507.5 502.3

Business parameters

Deposits (Cr) 47,500 44,300 47,500 44,300

Advances (Cr) 36,200 31,800 36,200 31,800

CD (%) 76.2% 71.8% 76.2% 71.8%

CASA Deposits (Cr) 9,800 8,200 9,800 8,200

CASA (%) 20.6 18.5 20.6 18.5

P&L Ratio (%)

NIM (%) 3.0 3.2 3.0 3.2

Cost/Income ratio (%) 55.6 54.7 55.6 54.7

RoA (%) 1.0 1.2 1.0 1.1

RoE (%) 16.2 19.2 15.9 19.4

Asset quality

GNPL (%) 1.2 1.4 1.2 1.4

NNPL (%) 0.8 0.8 0.8 0.8

Capital Adequacy (%)

CAR 12.5 13.9 12.5 13.9

Tier I 10.9 12.1 10.9 12.1

Tier II 1.6 1.8 1.6 1.8

Source: Axis, Ventura Research



Valuation

We initiate coverage on South Indian Bank with a BUY recommendation and a Price Objective of `45 (target Adj P/BV multiple of 1.5x) implying a potential upside of

~37%. At the CMP of `33, the stock is trading at an Adj P/BV of 1.3x and 1.1x for

FY15E and FY16E, respectively.

Revenue & Profitability

0%

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Rs Crore

NII PAT NII growth (RHS) PAT growth (RHS)


2 Yr EPS CAGR vs Adj P/BV

CUB

Federal

ING Vysya

Karnataka

Karur Vysya

SIB

0.5

0.8

1.1

1.4

1.7

12.0 17.0 22.0 27.0 32.0 37.0 42.0

2 Y

r A

dj.

P/B

V

(2 Yr EPS CAGR %) Source: SIB, Ventura Research



1 Year forward P/E chart

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SIB 3x 5x 7x 9x 11x


1 Year forward P/Adj BV chart

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SIB 0.5x 0.75x 1x 1.25x 1.5x




Financials and Projections

Y/E March, Fig in Rs. Cr FY 2013 FY 2014 FY 2015e FY 2016e Y/E March, Fig in Rs. Cr FY 2013 FY 2014 FY 2015e FY 2016e

Profit & Loss Statement Ratio Analysis

Interest Income 4,434.3 5,015.1 5,770.8 6,760.8 Efficiency Ratios (%)

Interest Expense 3,153.5 3,616.3 4,044.5 4,766.5 Int Exp / Int Earned 71.1% 72.1% 70.1% 70.5%

Net Interest Income 1,280.8 1,398.8 1,726.3 1,994.3 Int Income / Tot Funds 8.9% 9.1% 8.9% 8.7%

YoY change (%) 25.4% 9.2% 23.4% 15.5% NII/ Total Income (%) 26.9% 26.0% 27.8% 27.4%

Non Interest Income 334.9 368.5 442.2 530.6 Other Income / Tot Income 7.0% 6.8% 7.1% 7.3%

Total Net Income 1,615.8 1,767.2 2,168.4 2,524.9 Op Exp / Tot Income 16.1% 16.4% 16.3% 15.5%

Total Operating Expenses 767.2 882.9 1,011.5 1,131.5 Net Profit / Tot funds 1.0% 0.9% 1.0% 1.0%

Pre Provision profit 848.6 884.3 1,156.9 1,393.4 Credit-Deposit 71.9% 76.3% 76.3% 76.3%

YoY change (%) 30.2% 4.2% 30.8% 20.4% Investment / Deposit 28.3% 30.2% 28.5% 28.6%

Provisions and contingencies 192.7 155.4 198.4 237.1 NIM 3.2% 2.9% 3.1% 3.1%

Profit Befor Tax 655.9 728.9 958.6 1,156.2 Cost to Income 47.5% 50.0% 46.6% 44.8%

YoY change (%) 14.6% 11.1% 31.5% 20.6%

Taxes 153.6 221.4 325.8 393.0 Solvency

Net profit 502.3 507.5 632.8 763.2 Gross NPA (Rs. Cr) 433.9 432.6 565.4 672.4

YoY change (%) 25.1% 1.0% 24.7% 20.6% Net NPA (Rs. Cr) 249.5 281.7 391.0 461.7

Gross NPA (%) 1.4% 1.2% 1.3% 1.3%

Balance Sheet Net NPA (%) 0.8% 0.8% 0.9% 0.9%

Cash & Balances with RBI 1,696.7 2,200.8 2,681.3 3,229.4 Capital Adequacy Ratio (%) 13.9% 12.5% 12.1% 11.8%

Inter bank balance 2,639.2 1,017.1 1,638.6 1,973.5 Tier I Capital (%) 12.0% 10.9% 10.6% 10.1%

Investments 12,523.5 14,351.8 16,088.0 19,376.3 Tier II Capital (%) 1.9% 1.6% 1.5% 1.7%

Advances 31,815.5 36,229.9 43,113.5 51,736.2

Other Assets 1,120.1 1,186.4 1,413.7 1,619.4 Per Share Data (Rs.)

Total Assets 49,795.0 54,986.0 64,935.1 77,934.8 EPS 3.8 3.8 4.7 5.7

Deposits 44,262.3 47,491.1 56,514.4 67,817.3 Dividend Per Share 0.7 0.8 0.9 1.0

Demand Deposit 1,547.4 1,888.3 2,825.7 3,390.9 Adjst. Book Value 20.6 23.0 26.0 30.1

Savings Deposit 6,685.5 7,936.6 10,172.6 13,563.5

Term Deposit 36,029.5 37,666.2 43,516.1 50,863.0

Borrowings 1,284.6 2,730.8 3,070.7 3,946.6 Valuation ratios

Other Liabilties 1,242.0 1,393.7 1,467.9 1,659.9 Price/Earnings(x) 8.8 8.7 7.0 5.8

Equity 136.5 136.7 136.7 136.7 Price/ Adjst. Book Value(x) 1.6 1.4 1.3 1.1

Reserves 2,869.8 3,233.7 3,745.5 4,374.3

Total Liabilities 49,795.0 54,986.0 64,935.1 77,934.8

Return Ratios

Dupont Analysis RoA(%) 1.1% 1.0% 1.1% 1.1%

% of Avg Assets RoE(%) 19.4% 15.9% 17.4% 18.2%

Net Interest Income 2.8% 2.7% 2.9% 2.8%

Non Interest Income 0.7% 0.7% 0.7% 0.7% Growth Ratios (%)

Net Income 3.6% 3.4% 3.6% 3.5% Interest Income 23.7% 13.1% 15.1% 17.2%

Operating Expenses 1.7% 1.7% 1.7% 1.6% Interest Expenses 23.1% 14.7% 11.8% 17.9%

Operating Profit 1.9% 1.7% 1.9% 2.0% Other Income 35.6% 10.0% 20.0% 20.0%

Provisions & Contingencies 0.4% 0.3% 0.3% 0.3% Total Income 24.5% 12.9% 15.4% 17.4%

Taxes 0.3% 0.4% 0.5% 0.6% Net profit 25.1% 1.0% 24.7% 20.6%

RoAA(%) 1.1% 1.0% 1.1% 1.1% Deposits 21.3% 7.3% 19.0% 20.0%

Avg assets/Avg equity(x) 356.7 383.6 438.6 522.6 Advances 16.6% 13.9% 19.0% 20.0%

Ventura Securities Limited Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai – 400079 This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation.

South Indian Bank

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