Strong financials and good growth prospects
Based in Thrissur (Kerala), South Indian Bank (SIB) is a private sector bank which has been expanding its network in non-southern regions to achieve a pan-India presence. It has around 645 branches in India, three extension counters and over 570 ATMs. The Bank is present in 26 Indian states. With a new regional office in Kannur, SIB now has 16 regional offices that assist the branches in providing good customer service.
For the financial year ended 31 March 2011, the Bank’s net profit increased 25.15% to Rs292.56 crore from Rs233.76 crore. In the same period, its total income stood at Rs2,642.70 crore against Rs2,144.18 crore, a growth of 23.25%. According to SIB, it could achieve this quantitative enhancement in net profit essentially on account of higher operations and better management of assets and liabilities. The Bank has recommended a dividend of 50%, up from the 40% declared last year.
During FY10-11, the Bank opened 61 new branches and 116 ATMs across the country. The capital & reserves improved from Rs1,484.71 crore to a healthy level of Rs1,845.16 crore due to plough-back of profits and revaluation of premises. During FY10-11, 0.751 million new savings bank accounts were opened, of which, 0.282 million accounts belong to students. SIB increased its total deposits to Rs29,721 crore from Rs23,012 crore last year, registering a growth of 29.15%. SIB is rolling out its SIB FINS Card (Financial Inclusion Smart Card)-based financial inclusion project (FIP) covering 100 villages and 10 urban locations through the business correspondent (BC) model. The Bank also plans to appoint 300 BCs to provide basic banking services. The SIB FINS Card provides users a number of facilities such as customer enrolment through handheld terminals, flexibility to deposit money without biometric authentication of the customer and facility to make restricted non-smartcard-based transactions.
For the September 2011 quarter, SIB’s net profit rose 24.44% to Rs94.95 crore, while its total income increased 49%. Over the past five quarters, SIB has reported an average growth in revenues and operating profit of 34% and 56%, respectively. Its average operating margin is 19% and return on net worth is 17%. Its market-cap to revenues is 0.71, while its market-cap to operating profit is 3.96 times. The stock is an attractive buy at the current market price.
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