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Ventura Securities
South Indian Bank (Buy)
CMP: ₹32.95
Target: ₹45
South Indian Bank (SIB) has witnessed robust advances growth of CAGR of 25.1 per cent 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.
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 the past few years to continue. We expect advances and deposits to grow at a CAGR of about 19 per cent each over the forecasted period of FY14-16E.
In this adverse economic scenario, where most of the banks are suffering from asset quality issues, SIB with 1.2 per cent gross non-performing advances (GNPA) and 0.8 per cent 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.
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