Brokers' call: Edelweiss retains 'Hold' on South Indian Bank

Edelweiss has maintained its ‘Hold’ rating on South Indian Bank with a target price of Rs 30.

South Indian Bank’s (SIB) Q3 FY13 PAT of Rs 128 crore surpassed expectations due to beat at the NII level (up 29% y-o-y). NIMs surprised positively, up ~50bps q-o-q at 3.53%, supported by unwinding of interest income reversal in Q2 FY13, coupled with benefit from equity raising.

Headline GNPA/NNPA moderated to 1.62%/0.68% (1.74%/0.86% in Q2FY13) riding on higher reductions at Rs 73.9 crore (50% upgraded to standard restructured pool).

Loan growth (at 18%) came in below the historical run rate, given lower growth in gold and agri segments. "We expect the bank’s NIMs to moderate going forward and RoA to remain around ~1.1%," the brokerage house said in a report.

"SIB’s asset quality moderated in Q3FY13 with GNNPA/NNPA coming in at 1.74%/0.86% as slippages remained capped at <1%. Slippages came in at INR527mn (0.7% lower than past six quarters’ run rate of ~1.2%)," the report said.