Summary
The South Indian Bank Ltd. - Q3 FY26 Earnings Call Summary Friday, January 16, 2026 4:00 PM IST
Event Participants
Executives 5 Anto George T (COO), Dolphy Jose (Executive Director), Jimmy Mathew (GM & Company Secretary), P R Seshadri (MD & CEO), Vinod Francis (CFO)
Analysts 6 Bhavya Sanghvi, Darshan Deora, Darshil Jhaveri, Digant Haria, Jay Mundra, Parth M
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Deposits | ₹118,211 crores | +12% YoY; Bank maintained pricing 15 bps lower than peers to manage cost. |
| Total Business | ₹214,975 crores | +12% YoY; Balanced growth between assets and liabilities. |
| CASA Balances | ₹37,640 crores | +15% YoY; Strong growth in low-cost deposits. |
| Gross Advances | ₹96,764 crores | +11.3% YoY; Growth would be +12.4% excluding ₹900 cr technical write-off in Mar-25. |
| GNPA (%) | 2.67% | -163 bps YoY; Improved due to technical write-offs and recoveries exceeding slippages. |
| NNPA (%) | 0.45% | -80 bps YoY; Significant improvement in net asset quality. |
| PCR (%) | 91.57% | Including write-offs; PCR excluding write-offs stands at 83.5% (+1,177 bps YoY). |
| Net Profit | ₹374 crores | +9% YoY; Reflects steady operational performance. |
| NIM (%) | 2.86% | +6 bps QoQ; Improvement driven by loan mix shift despite repo rate headwinds. |
| Cost of Deposits | 5.34% | -7 bps QoQ; Strategic focus on low-cost liabilities. |
| Slippage Ratio | 0.16% | -17 bps YoY; Quarterly slippage rate remains low at 64 bps annualized. |
| CRAR (%) | 17.84% | Tier-1 ratio at 16.88%; Well-capitalized to support growth. |
| ROA (%) | 1.07% | Stable profitability; Management targets 1.15-1.20% over 12 months. |
Geographic & Segment Commentary
- Gold Loans: The book stands at ₹21,303 crores (+26% YoY), comprising 22% of the total loan book with an average LTV of 55%. Management is monitoring volatility-related risks but has not yet imposed a cap on exposure.
- MSME: Business loans reached ₹14,019 crores (+12% YoY excl. write-offs). The Bank is scaling its “MBG” branch-originated business, which delivers NIMs of 400-500 bps, achieving peak monthly disbursements of ₹300 crores in December.
- Retail: Grew 23% YoY, driven by mortgage, home loans (₹8,430 crores), and auto loans (₹2,393 crores). Strategic shifts are underway to move the corporate-to-retail mix toward a 1:2 ratio.
Company-Specific & Strategic Commentary
- Digital Underwriting: Launched “GST Power” and “LAP Power” platforms for digital underwriting of MSME and Mortgage loans, enabling faster turnaround times and data-driven scoring.
- Product Expansion: Rolling out ULI-based KCC Agri products in Tamil Nadu, followed by Andhra Pradesh, Telangana, and Karnataka to diversify the Agri portfolio.
- Direct Origination: Strategy focuses on branch-based origination rather than third-party commissions to preserve yields, specifically in the high-margin MBG segment.
- Credit Cards: Fresh issuances remain halted since March 2024; management is actively exploring alternate strategies and regulatory dialogues to restart this business.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Loan Growth | 12% and above | Participation in the “busy season” (Jan-March) expected to drive outcomes higher. |
| NIM | Stable / Marginal Bias | Repricing of 20% of the deposit book (80 bps benefit) to counter 25 bps repo cut impact. |
| ROA | 1.15% - 1.20% | Expected in the next 12 months as loan mix shifts toward high-yield retail/MSME. |
| CD Ratio | 85% - 86% | Current level is 82%; room for expansion using non-reserve required funding sources. |
Risks & Constraints
| Risk | Context |
|---|---|
| Repo Rate Sensitivity | The Bank passes repo cuts to customers on a T+1 basis, leading to immediate yield compression (25 bps impact felt in current quarter). |
| Credit Card Impairment | Approximately 50% of the quarterly slippages originated from the legacy credit card book which is currently not seeing new issuances. |
| Global Trade Volatility | Management is monitoring 16 export customers for trade relief; prolonged tariffs could force importers to seek alternate non-Indian suppliers. |
Q&A Highlights
Asset Mix and NIMs
- Question: When will the corporate mix shift toward retail, and how will it impact NII? (Digant Haria)
- Answer: Core corporate book is stagnant; growth is driven by transaction banking. Management aims for a one-third corporate mix in the medium term to drive NIM expansion (P R Seshadri).
Gold Loan Strategy
- Question: Is there a cap on gold loan exposure given the high growth? (Digant Haria)
- Answer: Current exposure is 22%. While monitoring gold price volatility, no cap is currently imposed as the bank broadens product types (P R Seshadri).
Asset Quality and Write-offs
- Question: What led to the sharp drop in GNPA? (Vivesha)
- Answer: A ₹900 crore technical write-off in March 2025 reduced GNPA by 100 bps; the remainder is due to recoveries significantly exceeding new slippages (P R Seshadri).
Credit Card and Portfolio Slippage
- Question: What drove the higher retail slippages this quarter? (Parth M)
- Answer: 50% of slippages came from the credit card book, and ₹17 crores from legacy portfolio buyout (DA) transactions. Personal loans remained non-material (P R Seshadri).
Operating Strategy and Liability Pricing
- Question: Why not grow faster than 12% given the low cost of funds? (Darshan Deora)
- Answer: Rapid growth would require offering higher deposit rates, destroying the current funding advantage (15 bps lower than peers). Focus is on “alpha” on yields first (P R Seshadri).
Key Takeaway
South Indian Bank delivered a steady quarter with a net profit of ₹374 crores, underpinned by 12% growth in both deposits and advances. The Bank successfully managed its NIM at 2.86% (+6 bps QoQ) by shifting its focus toward high-margin segments like Gold loans (+26% YoY) and branch-originated MSME loans. Asset quality improved significantly, with GNPA falling to 2.67% and Net NPA to 0.45%, though slippages from the credit card and portfolio buyout segments remain a monitorable area. Management remains committed to a 12% minimum growth target while prioritizing a 1.15%-1.20% ROA profile over the next year by utilizing its cost-of-funds advantage. The primary watch point remains the resumption of the credit card business and the impact of the recent repo rate transmission on near-term margins.
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