The South Indian Bank Limited

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 grew by 12% YoY to Rs.118,211 crores, and gross advances increased by 11.3% YoY to Rs.96,764 crores. The bank's total business expanded by 12% to Rs.214,975 crores, with pre-provisioning operating profit growing 11% to Rs.585 crores from Rs.529 crores.

Asset quality showed significant improvement, with Gross NPA reducing by 163 basis points YoY to 2.67% from 4.3%, and Net NPA decreasing by 80 basis points YoY to 0.45% from 1.25%. The slippage ratio also improved to 16 basis points in Q3 FY26 from 33 basis points in Q3 FY25. The Provision Coverage Ratio (including write-offs) stood at 91.57%. Capital adequacy remained strong with a CAR of 17.84% and a Tier-1 ratio of 16.88% as of December 31, 2025.

The Net Interest Margin (NIM) for the quarter was 2.86%, a sequential improvement of 6 basis points. Management expects NIMs to stabilize in the near term, despite the impact of a 25 basis points repo rate cut, due to the repricing of approximately 20% of the deposit book by 80 basis points. The bank aims for a Return on Assets (RoA) of 1.15% to 1.2% within the next 12 months, up from the current 1.07%, driven by robust portfolio growth and stabilizing NIMs.

The bank achieved its loan growth guidance of '12% and over,' with gross advances growing 11.3% YoY. Key growth drivers included the retail segment (23% YoY growth) and gold loans, which grew 26% on an annualized basis to Rs.21,303 crores. MSME business loans grew 12% to Rs.14,019 crores (excluding write-offs). The bank is strategically shifting its loan mix, aiming for corporate to constitute around 33% in the medium term, with a faster growth in retail, MSME, and Agri segments.

The bank acknowledged intense price competition, particularly in housing finance, which led to a de-growth in that segment as it strategically chose not to participate at lower yields (some nationalized banks operating at 7.1% or lower). In the credit card business, fresh issuances have been stopped since March 2024 due to external counterparty issues, prompting the bank to explore alternate strategies. To counter competition, the bank is broadening its product palette, leveraging new RBI regulations for relaxed LTV caps, and enhancing digital underwriting for MSME loans.

South Indian Bank has invested significantly in rearchitecting processes and systems, with new digital platforms like 'GST Power' for working capital and 'LAP Power' for loans against property going live over the last 24 months. These fully digital modes, combined with intensive staff retraining on MSME businesses, are enhancing efficiency. The bank also plans to expand its physical network, with 10-12 new branches expected to be built up in the near term, focusing on core areas like Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka.