South Indian Bank share price: Why ICICI Securities downgraded stock to 'Hold', cut target

ICICI Securities on Thursday said the appointment of Mahesh Pai could bring longevity to the MD and CEO role at South Indian Bank Ltd. The domestic brokerage said it had been positive on the bank's transformation, driven by a revival in MSME growth, continued cost control and superior asset quality. However, the sustainability of this transformation warrants close monitoring amid the ongoing leadership transition, it said.

Citing the ongoing leadership transition, the brokerage downgraded the stock to 'Hold' from 'Buy'.

ICICI Securities said that despite the frequent changes in top management, it does not envisage any governance or asset quality issues following the change of guard. It retained its growth and profitability estimates for FY27 and FY28 but conservatively lowered the target multiple to 0.8 times from 1 time earlier, cutting the target price to Rs 45 from Rs 56.

On Friday, South Indian Bank shares were trading 1.44 per cent higher at Rs 44.33 apiece, a day after falling 8.33 per cent. ICICI Securities' target suggests upside is capped on the counter. 

A seamless MD & CEO succession, along with higher-than-expected growth and net interest margin (NIM), are key upside risks for South Indian Bank. On the other hand, a churn in senior management and a rise in the cost-to-income ratio are the key downside risks, ICICI Securities said.

Recently, Biji S S, CGM and Head of branch banking, liabilities, chose voluntary retirement to pursue opportunities outside the bank. 

ICICI Securities said Pai, currently serving as CGM at Canara, has close to three decades of experience across governance, strategy, treasury, foreign exchange, retail, agriculture and MSME credit. At Canara, Pai has handled multiple strategic initiatives, including the setting up of its gold loan vertical and has headed one of the largest zones. He has also worked in the overseas branches of the bank.