Shares of South Indian Bank soared 10 per cent in Tuesday's trade, taking their winning streak to seventh straight session. The lender reported better-than-expected September quarter results, with operating performance improving for the third consecutive quarter.
ICICI Securities has revised its price target on the stock to Rs 13 from Rs 8, as it upgraded its earnings estimates by 75 per cent for FY23 and 50 per cent for FY24E. The brokerage values the stock 0.5 times September 2023 book value per share against 0.4 times earlier.
On Tuesday, the scrip rose 16.44 per cent to hit a 52-week high of Rs 13.81 on BSE. The stock is up 43 per cent in the last seven sessions.
The lender reported a net profit of Rs 223.10 crore for the September quarter, led by a drop in provisions for bad loans. The bank had posted a net loss of Rs 187.06 crore in the same quarter last year.
Total income for the quarter rose 10.6 per cent YoY to Rs 1,995.24 from Rs 1,803.76 crore in the year-ago quarter. Interest income for the quarter jumped to Rs 1,740.14 crore from Rs 1,646.59 crore.
Asset quality for the lender improved as gross non-performing assets (NPAs) declined to 5.67 per cent of gross advances from 6.65 per cent in the year-ago quarter.
ICICI Securities noted that the bank, post the onboarding of new managing director in September 2020, focused on growing the balance sheet in a calibrated manner with prime focus on net interest income (NIM) and asset quality.
It has since churned 50 per cent of overall loan book, and operating metrics in the new book are at par with industry standard, the brokerage said in an October 22 note.
"Gross non performing loans in the new book is at only 0.03 per cent with SMA-2 at 0.3 per cent and NIM at 3.60 per cent. Within the corporate segment, ‘A & above’ rated corporates now account for 93 per cent of the total segmental loans against 66 per cent in September 2020. Notably, SIB delivered an average RoA of 0.80 per cent in past 3 quarters with PCR (ex write-offs) improving to 57 per cent against 44 per cent in the year-ago quarter,” ICICI Securities said.
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