The South Indian Bank Limited — Q1 FY27 earnings call

Call held 17 Jul 2026

Management summary

The South Indian Bank Limited reported a strong Q1 FY27 with a 17% YoY increase in net profit to INR378 crores, driven by robust NII growth and significant NIM expansion. Asset quality improved substantially with reduced NPAs and healthy provision coverage. While fee income was soft and recoveries were lower, management attributed these to temporary factors and expressed confidence in future improvements and continued credit growth across key segments.

Highlights

  • Net Profit for Q1 FY27 was INR378 crores, registering a growth of 17% compared to INR322 crores in Q1 FY26.

  • Net Interest Income (NII) reached INR1,025 crores, the highest ever for the quarter, marking a 23% growth YoY.

  • Gross Advances grew by 17% YoY to INR104,368 crores (18% excluding write-offs), driven by strong growth in gold loans (43%), mortgage (34%), and auto loans (34%).

  • Net Interest Margin (NIM) improved to 3.23%, up 28 basis points sequentially and 20 basis points YoY, due to effective liability management and asset repricing.

  • Asset quality showed significant improvement with Gross NPA reducing by 177 basis points YoY to 1.38% and Net NPA reducing by 42 basis points YoY to 0.26%.

Concerns

  • Fee income was soft, declining QoQ, and lower YoY due to one-off items and technical reasons, though management expects recovery.

  • Recoveries for the quarter were lower than normal at INR179 crores, compared to INR800-1,000 crores expected for the full year.

  • Corporate credit grew against the bank's long-term strategic objective to reduce it, though management justified it as an opportunistic, low-risk deployment in an uncertain environment.

Key financials

  1. Net Profit ₹378 Cr +17%YoY
  2. Total Deposits ₹1.26L Cr +11%YoY
  3. Gross Advances ₹1.04L Cr +17%YoY
  4. NIM 3.2% +0.2%YoY
  5. Gross NPA 1.4% -1.8%YoY
  6. Net NPA 0.26% -0.42%YoY
  7. Net Interest Income ₹1,025 Cr +23%YoY
  8. CASA ₹41,496 Cr +15%YoY
  9. RoA 1.1%
  10. RoE 12.8%
  11. Slippage Rate (Quarterly) 0.12%
  12. Credit Cost (Quarterly) 0.09%

What they filed

Q1 FY27: revenue up 11.3%, net profit up 17.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,355 2,371 2,373 2,362 2,407 +2%2,518 +6%2,559 +8%2,628 +11%
Net profit325 342 342 322 351 +8%374 +9%408 +19%378 +17%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Retail Deposits
    ₹1.24L Cr Value14% Growth
  • Business Loans (MSME)
    ₹14,391 Cr Value13.6% Growth
  • Gold Loan
    ₹24,930 Cr Value43% Growth
  • Mortgage Loans
    34% Growth
  • Home Loans
    19% Growth
  • Auto Loans
    34% Growth

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Capital adequacy ratio for the bank was at 19.62% and the Tier 1 ratio stands at 18.93% as on June 30, 2026.
    Capital adequacy ratio for the bank was at 19.62% and the Tier 1 ratio stands at 18.93% as on June 30, 2026.

Guidance & targets

Profitability

  • NIM Profitability · going forward · Medium confidence harden
    our belief is the rate cycle has switched. So it's more likely to increase than to reduce. And if that belief is right, then our view is that the NIMs from here should harden as the repo rate changes come into effect.

    — P. R. Seshadri

  • RoA Profitability · Over time · Medium confidence 120-125 bps

    Previously 100 to 110, 115 range → 120-125 bps

    We had said that we'd be in the 100 to 110, 115 range. Over time, that should sort of migrate to 120, 125.

    — P. R. Seshadri

Operating Expenses

  • Opex Growth Operating Expenses · current year · High confidence 5%-6%
    We are not expecting that any significant increase in the opex that to come in the current year to materially alter the P&L structure. We should be within the range of, say, maybe 5%-6% in that range.

    — Vinod Francis

Fee Income

  • Fee Income Recovery Fee Income · going forward · Medium confidence address this going forward
    we think that this is a one-off. We were very busy working on our NIMs, and we were not laser-focused on fees. So we will start our renew our focus on this element. And we do not see this as a trend. I think we should be able to address this going forward.

    — P. R. Seshadri

Asset Quality

  • Slippage Asset Quality · FY · High confidence INR500 crores to INR750 crores (max INR800 crores)
    We think that our slippage will be in the neighborhood of INR500 crores to INR750 crores, INR800 crores will be the maximum slippage given the current trend lines that we can see

    — P. R. Seshadri

  • Recoveries Asset Quality · FY · High confidence INR800 crores to INR1,000 crores
    And our recoveries will be in the neighborhood of INR800 crores to INR1,000 crores.

    — P. R. Seshadri

Balance Sheet

  • Balance Sheet Growth Balance Sheet · ongoing · Medium confidence market growth plus 2%
    The plan for deploying excess capital very clearly is to grow the balance sheet at wherever the market is growing plus 2%, a couple of percent above where the market is growing.

    — P. R. Seshadri

Credit Growth

  • MSME Loan Growth Credit Growth · this quarter · Medium confidence go back to the scale mode
    the fraternity has reacted as business as usual, and that's giving us some confidence to make sure that this quarter, we will go back to the scale mode.

    — Dolphy Jose

  • ECLGS Contribution Credit Growth · ongoing · Medium confidence progressively increasing
    So I think we're looking at progressively increasing that ECLGS contribution to the book.

    — Dolphy Jose

Market context

  • Credit Costs Credit Costs · going forward · Medium confidence moderate
    We think that the 9 basis points that we currently have is probably on a generous side. So hopefully, as we go forward, our credit costs will moderate from here, if anything.

    — P. R. Seshadri

What to watch in Q2 FY27

Fee Income Recovery

Next quarter
Current Soft, declined QoQ, lower YoY
Target Improvement, addressing technical reasons

Why it matters

Fee income is a key component of non-interest income and overall profitability.

we think that this is a one-off. We were very busy working on our NIMs, and we were not laser-focused on fees. So we will start our renew our focus on this element. And we do not see this as a trend. I think we should be able to address this going forward.

Risks & concerns

  • Uncertain environment / West Asia problem

    medium

    The uncertainty associated with the Persian Gulf continues, influencing corporate credit strategy.

    Management acknowledged

  • Leadership Stability

    medium

    Analyst questioned the recurring leadership changes at the MD/CEO level.

    Analyst deflected

  • Softness in Fee Income

    low

    Fee income was soft due to temporary focus on NIMs and technical reasons, but expected to recover.

    Management acknowledged

  • Muted Gold Loan Q-o-Q Growth

    low

    Q-o-Q growth in gold loans was impacted by an RBI circular and runoff of bulk deals, despite strong YoY growth.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Cost of Deposits, Asset Yields, and NIM Outlook Direct
A very substantial portion of our high rate deposits actually rolled off and repriced downwards by anywhere between 40 to 60 basis points... the net interest margin for the quarter was up sequentially 28 basis points. And on a Y-o-Y basis, the NIM was up 20 basis points.

Explains the drivers behind NIM expansion and cost of funds reduction, indicating active management of the liability side.

Asked by Akshat Agrawal

Fee Income Weakness and Recovery Outlook Direct
we think that this is a one-off. We were very busy working on our NIMs, and we were not laser-focused on fees. So we will start our renew our focus on this element. And we do not see this as a trend. I think we should be able to address this going forward.

Addresses a concern about declining fee income, attributing it to a temporary shift in focus and technical reasons, with an expectation of recovery.

Asked by Akshat Agrawal

Corporate Credit Growth vs. Strategic Objective Direct
Our aim in the long run is to bring corporate down. But under the current circumstances... high-quality corporates offer lower risk than some of the other segments we operate in... this is a onetime adjustment, which has occurred on account of environmental conditions and also given the strengths that we have on the corporate side.

Clarifies the bank's opportunistic approach to corporate credit in an uncertain environment, balancing risk and returns, while reiterating the long-term strategy.

Asked by Prashant Kumar

FCNR B Deposit Growth and Outlook Direct
The growth has been robust, and we are participating actively on the FCNR scheme... We believe that a vast amount of these flows will come in August and September because the offer is open until September 30.

Indicates strong performance and positive outlook for FCNR deposits, a key funding source.

Asked by Suraj Das

Leadership Stability and MD/CEO Transition Evasive
I cannot really answer for Mr. Murali's decisions. I can only say that I was initially also in my mind, I did not see this. I'm leaving as a consequence of the fact that I believe that I want to do other things with my time.

Highlights a recurring concern about leadership changes at the bank, though the outgoing MD/CEO provides a personal reason for his departure.

Asked by Ravindra

Gold Loan Q-o-Q Growth and RBI Circular Impact Direct
there was a change in our process and policies, occasioned by the fact that the RBI had come out with a circular on gold loans and which went into effect on the 1st of April... Those ran off to the extent of almost INR270 crores or so.

Explains the reason for muted Q-o-Q growth in gold loans despite strong YoY growth, attributing it to regulatory changes and runoff of bulk deals.

Asked by Parth Gutka

SMA-1 and -2 Increase Direct
SMA-1 and -2 always increases in the first quarter from the fourth quarter. there's a seasonality in it... we believe that they are reversible and that they do not materially add to the risk that we are carrying.

Addresses a potential asset quality concern, clarifying it as a seasonal trend and not a material increase in risk.

Asked by Parth Gutka

3 min read 7 chapters

Detailed narrative

Q1 FY27 Financial Performance Overview

The South Indian Bank Limited reported a net profit of INR378 crores for Q1 FY27, marking a 17% year-on-year growth compared to INR322 crores in Q1 FY26. Total deposits grew by 11% to INR125,817 crores, with retail deposits increasing by 14% to INR124,306 crores. Gross advances expanded by 17% to INR104,368 crores, contributing to a 14% growth in total business to INR230,185 crores. The bank achieved a Return on Assets (RoA) of 105 basis points and a Return on Equity (RoE) of 12.84%.

Net Interest Margin (NIM) and Cost of Funds

The bank's Net Interest Margin (NIM) for the quarter stood at 3.23%, reflecting a sequential increase of 28 basis points and a year-on-year increase of 20 basis points. This improvement was primarily driven by effective liability management, including the repricing of high-rate deposits downwards by 40 to 60 basis points. Additionally, a 15% year-on-year growth in CASA balances to INR41,496 crores and a 50% reduction in bulk deposits contributed significantly to managing the cost of funding.

Asset Quality and Credit Costs

Asset quality showed notable improvement, with Gross Non-Performing Assets (NPA) reducing by 177 basis points year-on-year to 1.38%, and Net NPA decreasing by 42 basis points year-on-year to 0.26%. The provision coverage ratio, including write-offs, improved by 569 basis points to 94.51%. The slippage ratio for the quarter was 12 basis points (annualized 48 bps), and the credit cost was 9 basis points. Management anticipates full-year slippages to be in the range of INR500-750 crores (maximum INR800 crores) and recoveries between INR800-1,000 crores.

Fee Income and Other Income Dynamics

Fee income for the quarter was soft, experiencing a decline quarter-on-quarter and being lower year-on-year. This was attributed to a temporary shift in focus towards NIM improvement and some technical reasons related to product setup. Other income was also impacted by the absence of one-off items, such as spectacular treasury income and PSLC sales of approximately INR60 crores, which were present in the prior year's corresponding quarter. The bank expects fee income to recover as focus returns to this area and new trade and FX platforms go live by September.

Credit Growth Across Segments

The bank demonstrated strong credit growth across several segments. Business loans (MSME) grew by 13.6% year-on-year to INR14,391 crores (18% excluding a INR554 crore write-off). Gold loans saw a robust 43% year-on-year increase to INR24,930 crores, though quarter-on-quarter growth was muted due to an RBI circular on gold loans and the runoff of co-lending arrangements. Mortgage loans, home loans, and auto loans also recorded significant year-on-year growth of 34%, 19%, and 34% respectively. Corporate credit grew opportunistically, leveraging better pricing and lower risk in an uncertain market environment.

Capital Adequacy and Balance Sheet Strategy

The bank maintained a strong capital position with a Capital Adequacy Ratio (CAR) of 19.62% and a Tier 1 ratio of 18.93% as of June 30, 2026. Management's strategy involves growing the balance sheet at a rate of market growth plus 2% and shifting the asset mix towards higher-yielding assets. This approach is expected to improve the Return on Assets (RoA) from the current 105 basis points to a target range of 120-125 basis points over time, while ensuring positive operating leverage.

Leadership Transition and Outlook

Mr. P. R. Seshadri, the outgoing Managing Director and CEO, confirmed his departure, citing personal reasons and a desire to pursue other endeavors. He reflected positively on his 2 years and 9 months tenure, highlighting significant progress in new products, systems, processes, and organizational structure. While expressing confidence in the bank's future, he refrained from providing specific long-term guidance, acknowledging his impending exit and the responsibility of his successor.

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