*South Indian Bank-**Superior fundamentals but valuation at discount to peers*
SIB trades at a 10-30% discount to comparable peers such as Federal Bank, ING Vysya Bank, Karnataka Bank and Dhanalakshmi Bank despite its superior growth profile, stronger balance sheet and higher RoE. We expect this anomaly to correct in the next 3-6 months. Further with no promoter interest, SIB is also an attractive M&A play. *SIB is set to sail faster post a successful transformation* * * Under the aegis of new management, South Indian Bank (SIB) has transformed from a tradional, inefficient, treasury-focused, regional private bank to a modern, tech savvy, efficient, core operation focused and regionally more diversified private bank. The brand equity of the bank has witnessed a sea change, which is reflected in the 22% and 24% balance sheet and loan CAGR over FY05-10. With transformation complete, SIB is set for a smoother and sturdier growth over the next three years through execution on its strategic plan – ‘Vision 2013’. Under this, the bank is targeting a robust 25% business CAGR over FY10-13 and further improvement in efficiency levels. With credit environment turning favourable and a credible management, we are confident that SIB would achieve its targets. *28% NII CAGR over FY10-12; adequately capitalized for growth* * * On the back of firm margin and 24% credit growth, we expect SIB to deliver a strong 28% NII CAGR over FY10-12. Bank’s NIM is likely to move in a narrow band of 2.6-2.9% in the medium term cushioned by improvement in C/D ratio and strong deposit franchise that includes low-cost NRI deposits. Presently, SIB has the highest Tier-I capital amongst private banks at 13.1% providing more than sufficient headroom to grow at the targeted pace. The bank’s balance sheet is one of the strongest in the industry with a high Tier-1 capital, low RWA/IEA ratio (45%) and negligible net NPLs (0.4%). *Asset quality to remain stable; RoE to improve* The asset quality of SIB has significantly improved over the past five quarters with GNPLs declining from 2.2% in Q4 FY09 to 1.3% in Q1 FY11. With conservative provisioning, the NNPLs have come down to 0.4% from 1.1% in the aforesaid period and PCR has crossed the 70% mark. Going ahead, we expect NPL levels to remain stable with strong loan book expansion. The FY10 RoA and RoE of SIB at 1% and 17% respectively were better than many private banks and we expect the RoE to improve to 19% by FY12 despite being conservative with respect to treasury income and provisioning. * * *Safe Harbor Statement:* *Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.* ** *Nothing in this article is, or should be construed as, investment advice.** * ** * * * * ** ** -- For Anything related with Stock market be Online at http://www.niftyviews.com/ Get free updates on your mobile phone. Sms "Join TSR " and send to 09223492234 FOR TRIAL STOCK/NIFTY/OPTION CALLS You received this message because you are subscribed to Google Group "STOCKRESEARCHER" group. To post to this group, send an email to [email protected] To unsubscribe email [email protected] for more info visit http://groups.google.com/group/STOCKRESEARCHER?hl=en-GB . This is Not a Spam Mail. Disclaimer :- "The opinions expressed by the members on this board are based on their individual experience and perceptions and to share information with other members with the best of intentions to help fellow members in investment decisions as equity investment is a risky venture."
