South Indian Bank delivered a strong Q3 FY26, with net profit rising 9% YoY to Rs.374 crores, supported by robust growth in deposits (12% YoY) and advances (11.3% YoY). The bank showcased improved asset quality, with GNPA falling to 2.67% and Net NPA to 0.45%, alongside a 6 bps QoQ improvement in NIM to 2.86%. Management maintained its loan growth guidance of '12% and over' and projected ROA to reach 1.15-1.2% within 12 months, while actively managing competitive pressures and strategic portfolio shifts.
vs Q4 FY26
| Metric | Value | YoY |
|---|---|---|
| Net Profit | ₹374 Cr | +9.0% YoY |
| Total Deposits | ₹1.2L Cr | +12.0% YoY |
| Gross Advances | ₹97K Cr | +11.3% YoY |
| Pre-provisioning Operating Profit | ₹585 Cr | +11.0% YoY |
| NIM | 2.86% | — |
| RoA | 1.07% | — |
| Metric | Latest | Trend |
|---|---|---|
| Net Profit(crores) | 374 | |
| Operating Profit(crores) | 535 | |
| Total Deposits(crores) | 118211 | |
| Gross Advances(crores) | 96764 | |
| Gross NPA | 2.67% | |
| Net NPA | 0.45% |
| Category | Target | Priority |
|---|---|---|
| Credit Growth | Overall Loan Growth→12% and over | High |
| Credit Growth | CD Ratio→85%, 86% | Medium |
| Profitability | NIM Trajectory→Stabilized and climbing | Medium |
| Profitability | Return on Assets (RoA)→1.15% to 1.2% | High |
| Credit Cost | Credit Cost→7, 8 basis points | Medium |
| Asset Quality | GNPA/NNPA Trend→Continue to improve, trending downwards | Medium |
| Branch Expansion | New Branches→10 or 12 branches | Medium |
| Portfolio Mix | Corporate Loan Share→33% | Medium |
| Disbursements | MSME MBG Monthly Disbursal→Double from Rs.300 crores | Medium |
| # | Metric | |
|---|---|---|
| 01 | NIM Trajectory | |
| 02 | Credit Cost | |
| 03 | Return on Assets (RoA) | |
| 04 | Corporate Loan Book Share | |
| 05 | MSME MBG Monthly Disbursal |
| Severity | Risk |
|---|---|
medium | Impact of Repo Rate Cuts on NIM The full impact of the 25 basis points repo rate reduction will be felt this quarter, potentially causing marginal downward pressure on NIM. Management |
medium | Volatility in Gold Prices The bank is closely monitoring its gold loan exposure, especially against volatility in gold prices, as gold loans constitute about 22% of the total book. Management |
medium | Intense Price Competition in Housing Loans Yields on housing finance have dropped significantly, with nationalized banks offering very low rates, making the segment highly price-sensitive and leading to volume loss. Management |
medium | Disruption in Credit Card Business Fresh credit card issuances have been stopped since March 2024 due to issues with an external counterparty, impacting the growth of this portfolio. Management |
South Indian Bank reported a net profit of Rs.374 crores for Q3 FY26, marking a 9% year-on-year growth compared to Rs.342 crores in Q3 FY25. Total deposits expanded by 12% YoY to Rs.118,211 crores, while gross advances grew 11.3% YoY to Rs.96,764 crores. Pre-provisioning operating profit also saw an 11% increase, reaching Rs.585 crores, demonstrating strong operational efficiency.
The bank's Net Interest Margin (NIM) improved by 6 basis points sequentially to 2.86%. Asset quality showed significant improvement, with Gross NPA reducing by 163 basis points YoY to 2.67% and Net NPA falling by 80 basis points YoY to 0.45%. The slippage ratio also decreased to 16 basis points for the quarter, down from 33 basis points in Q3 FY25, reflecting effective recovery efforts.
The gold loan business demonstrated robust growth, increasing by 26% on an annualized basis to Rs.21,303 crores. MSME business loans grew 12% (excluding write-offs) to Rs.14,019 crores, and the retail segment expanded by 23% YoY. The bank is leveraging new RBI regulations, digital systems like GST Power and LAP Power, and retraining staff to enhance competitiveness and efficiency in these high-growth segments.
Management expects NIMs to stabilize in the current quarter and begin climbing thereafter, contingent on no further repo rate cuts, as deposit repricing offsets recent rate reductions. The bank targets an ROA of 100-115 basis points in the near term, aiming for 1.15-1.2% within the next 12 months. The strategy involves growing retail, MSME, and gold loans faster, with a medium-term goal to reduce the corporate loan share to 33%.
The credit cost for the near term is projected to be around 7-8 basis points, approximately half of the current slippage rate, with recoveries expected to outpace new NPA accruals. The Capital Adequacy Ratio stands strong at 17.84%, with a Tier-1 ratio of 16.88% as of December 31, 2025, providing ample capital for sustained growth and expansion.
The bank faces challenges in its credit card business, with fresh issuances halted since March 2024 due to issues with an external counterparty, leading to a declining book. The housing finance segment experiences volatility due to intense price competition, with yields dropping to very low levels, causing the bank to strategically re-evaluate its participation in this segment.