| South Indian Bank-System Aberration, Time To Reboot BUY
Q4FY10 absorbs full-year interest burden on special deposit scheme
System migrates to daily accrual basis with immediate effect Independent risk mitigation group established for proactive monitoring Gross NPA at 0.6% and net NPA at 0.17% Convinced on management credibility and implementation of correctivemeasures to address.
Maintain BUY with a revised TP of Rs180 (from our earlier TP of Rs190).
South Indian Bank (SIB), suffering from a system aberration, reported a below-par performance during Q4FY10 with NII at Rs7.89bn, registering a 46% YoY decline while net profit clocked in at Rs386mn, witnessing a 23% YoY decline. The system error resulted in SIB having to absorb the full-year impact of the interest expenditure from a special deposit scheme during Q4FY10 alone. Subsequent to our interaction with senior members of the management team as well as the head of the IT department, we are convinced that corrective measures have been introduced and implemented. We append a piece on the key takeaways from our interaction with a senior member of SIB's IT team. Valuation and recommendation: stock with a marginally revised TP of Rs180. Our FY11E estimates have undergone downward adjustments to factor in the management guidance on key parameters. 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. |
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