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Hidden Gem - South Indian Bank - (CMP - ₹42, Mcap - ₹10,965 crore, Buy, Target - ₹52)

ICICIdirect Research 08 May 2026 DISCLAIMER

South Indian Bank is old south based private sector bank headquartered in Thrissur, Kerala. Digitization, product & process innovation and granular sustainable growth remains key focus, enabling resilient performance amid change in asset mix. The Advances mix: Corporates – 38%, Retail – 29%, Agri – 19%, MSME – 14%
It reported a strong Q4FY26 performance, driven by continued improvement in asset quality, gradual recovery in margins and healthy traction in retail and gold loan segments. Gross advances grew 14.5% YoY (3.6% QoQ) to ₹1,00,274 crore, aided by robust growth in gold loans (+46% YoY), mortgage loans (+43% YoY) and auto loans (+21% YoY), while deposits increased 14.7% YoY (4.3% QoQ) to ₹1,23,346 crore, with CASA ratio improving 28 bps QoQ to 32.1%.
Building on the positive momentum, margins improved further to 2.95% (+9 bps QoQ), supported by strong growth in fixed-rate gold loans (+16% QoQ), which now constitute 24.7% of total advances (vs. 22% in Q3FY26). Management has guided for NIMs to improve toward ~3.25% over the medium term, aided by favourable asset mix and repricing benefits.
Asset quality remains a key positive, with slippages contained at ₹1,430 crore (vs. ₹2,582 crore in Q3FY26), while GNPA/NNPA declined 124/16 bps QoQ to 1.43%/0.29%, respectively. PCR improved further to 94.1%, reflecting a strong provision buffer.
Continued strategy to shift loan mix towards retail and SME segment (management targets to reduce contribution from corporate segment from currently ~38% to ~33%) is expected aid improvement in RoA towards ~1.1–1.2%. With tenure of current MD & CEO till September 2026, leadership succession remains key monitorable.
Factoring improving fundamentals and sustained return ratios, we value the bank at ~1x FY28E ABV. Buy, Target - ₹52

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