The South Indian Bank Limited — Q3 FY26 earnings call

Call held 16 Jan 2026

Management summary

South Indian Bank delivered a strong Q3 FY26 performance with robust growth in net profit, deposits, and advances, coupled with significant asset quality improvements. NIM saw sequential expansion, and the bank is strategically rebalancing its loan mix towards retail and MSME. While facing competition in certain segments and challenges in its credit card business, management expressed confidence in maintaining growth and profitability targets.

Highlights

  • Net profit grew 9% YoY to Rs.374 crores, compared to Rs.342 crores in Q3 FY25.

  • Total deposits increased 12% YoY to Rs.118,211 crores from Rs.105,387 crores.

  • Gross advances grew 11.3% YoY to Rs.96,764 crores from Rs.86,966 crores.

  • Net Interest Margin (NIM) improved by 6 bps sequentially to 2.86%.

  • Asset quality significantly improved with Gross NPA reducing by 163 bps YoY to 2.67% and Net NPA by 80 bps YoY to 0.45%.

Concerns

  • Potential NIM pressure from the 25 basis points repo rate cut, though expected to be managed by deposit repricing.

  • Housing finance segment experienced de-growth due to intense price competition, leading to a loss of volume in December.

  • Credit card book continued to decline as fresh issuances have been stopped since March 2024 due to external counterparty issues.

Key financials

  1. Net Profit ₹374 Cr +9%YoY
  2. Total Deposits ₹1.18L Cr +12%YoY
  3. Gross Advances ₹96,764 Cr +11.3%YoY
  4. NIM 2.9%
  5. RoA 1.1%
  6. Gross NPA 2.7% -37.9%YoY
  7. Net NPA 0.45% -64%YoY
  8. Slippage Ratio 16 bps -51.5%YoY
  9. PCR (incl. write-off) 91.6% +9.7%YoY
  10. CASA Balances ₹37,640 Cr +15%YoY
  11. Pre-provisioning operating profit ₹585 Cr +11%YoY

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

  • Gold Loan Business
    ₹21,303 Cr Book Size26% Annualized Growth55% Average LTV₹2.46 lakh Average Ticket Size
  • MSME Business Loans
    ₹14,019 Cr Book Size12% Growth (excl. write-off)
  • Retail Segment
    23% Growth
  • Home Loan Book
    ₹8,430 Cr Book Size
  • Auto Loan Book
    ₹2,393 Cr Book Size
  • PL Loan Book
    ₹2,217 Cr Book Size
  • Co-lending Partnerships
    ₹1,900 Cr Overall Book Size₹1,500 Cr Gold Loan Component

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Capital Adequacy Ratio for the Bank is at 17.84% and the Tier-1 ratio stands at 16.88% as at December 31, 2025.
    Capital adequacy ratio for the Bank is at 17.84% and the tier-1 ratio stands at 16.88% as at December 31, 2025.

Guidance & targets

Volume

  • Loan Growth Volume · FY26 · High confidence 12% and over
    we had said that we would do 12%... and actually, we have done 12%. If you were to add back the write-off that we have done in Q3, I mean in March of 2025, which is roughly Rs.900 crores. So, to add it back, we would be 12.43% year-on-year. So, on a like-for-like basis, we have done 12%. And we think that this being the busy season, the Jan-to-March quarter, there is a likelihood that we will participate in the increased demand for loans and have outcome better than that. So, what we said the last time around was that we want to be 12% and over. So, we are still sticking to that.

    — P.R. Seshadri

Profitability

  • Return on Assets (RoA) Profitability · next 12 months · Medium confidence 1.15% to 1.2%
    in a 12-month period, we should end the 12 months at about 1.15% to 1.2% or thereabouts.

    — P.R. Seshadri

Margin

  • Net Interest Margin (NIM) Margin · going forward · Medium confidence stabilized and climbing
    we do not think it should materially alter our NIMs for the quarter. And going forward, subject of course to no further repo rate cuts, we think that the net interest margin that we report will start climbing as the book starts driving.

    — P.R. Seshadri

Loan Mix

  • Corporate Loan Mix Loan Mix · medium term · Medium confidence 33%
    in the medium term, I think we would near, I mean, head towards 33%, one- third corporate and the rest being retail, MSME and Agri.

    — P.R. Seshadri

Credit Cost

  • Credit Cost Credit Cost · near term · Medium confidence 7, 8 basis points
    slippages are in the 16, 17 basis points range, credit cost would be maybe half that. So, 7, 8 basis points would be the credit cost in the near term.

    — P.R. Seshadri

Asset Quality

  • NPA Trend Asset Quality · near term · High confidence trending downwards
    We expect these numbers to continue to improve in the near term, so, you will see them trending downwards.

    — P.R. Seshadri

Branch Network

  • Branch Expansion Branch Network · near-term · High confidence 10 or 12 branches
    In the near-term, there may be 10 or 12 branches that are built up.

    — P.R. Seshadri

Ratio

  • CD Ratio Ratio · future · Medium confidence 85%, 86%
    We think that there is still some headroom available there. We can get to 85%, 86%.

    — P.R. Seshadri

What to watch in Q4 FY26

NIM Trajectory

next quarter
Current 2.86%
Target Stabilizing and climbing

Why it matters

NIM is a key driver of profitability, and its upward trend will indicate effective management of funding costs and asset yields.

And going forward, subject of course to no further repo rate cuts, we think that the net interest margin that we report will start climbing as the book starts driving.

Risks & concerns

  • NIM Pressure from Repo Rate Cuts

    medium

    A 25 basis points reduction in the repo link book will impact NIMs, though expected to be managed by deposit repricing.

    Management acknowledged

  • Competition in Retail and Gold Loan Segments

    medium

    Price competition exists, but the bank is leveraging product diversification, new RBI regulations, and trust in semi-urban/rural areas to compete effectively.

    Management acknowledged

  • Housing Finance Volume Loss due to Price Competition

    medium

    Yields on housing finance have dropped significantly due to nationalized banks, leading to a strategic decision to reduce volume in December.

    Management acknowledged

  • Credit Card Business Decline

    medium

    Fresh issuances of credit cards have been stopped since March 2024 due to issues with an external counterparty, and the bank is exploring alternate strategies.

    Management acknowledged

Q&A highlights

8 direct
Loan Growth Guidance Direct
we had said that we would do 12%... and actually, we have done 12%. If you were to add back the write-off that we have done in Q3, I mean in March of 2025, which is roughly Rs.900 crores. So, to add it back, we would be 12.43% year-on-year. So, on a like-for-like basis, we have done 12%.

Analyst sought clarity on loan growth targets, and management reaffirmed its 12%+ guidance, providing context on past write-offs.

Asked by Digant Haria

Retail/Corporate Mix Shift and Gold Loan Capping Direct
at this juncture, we have not imposed any caps. Our total exposure of gold loans to our total book is roughly about 22%. So, we are monitoring it very closely... in the medium term, I think we would near, I mean, head towards 33%, one- third corporate and the rest being retail, MSME and Agri.

Analyst questioned the strategic direction of the loan book mix and potential constraints on high-growth gold loans, to which management provided clarity on targets and current strategy.

Asked by Digant Haria

NIM Trajectory and Cost of Funds Direct
we have absorbed 125 basis points reduction in NIM and as we go forward, we are entering a relatively favorable phase for deposit repricing... cost of deposits have been coming off; they came off 7 basis points in the last quarter from 5.41% to 5.34%.

Analyst probed the sustainability of NIMs given market dynamics, and management explained offsetting factors like deposit repricing and declining cost of deposits.

Asked by Vivesha

GNPA Reduction and Stabilization Direct
gross NPA on a year-on-year drop is also partially contributed by a write-off of Rs.900 crores during March of 2025. So, that is a 100 basis points reduction in the book itself. So, from 4.5%, that would have brought it down to 3.5%. The rest is on account of excess of recovery over new NPA accruals.

Analyst sought reasons for the significant GNPA drop, and management clarified the contribution of write-offs and strong recovery efforts, guiding for further improvement.

Asked by Vivesha

ROA Improvement Target Direct
I think we will operate in the 100 to 115 basis points in the near term... in a 12-month period, we should end the 12 months at about 1.15% to 1.2% or thereabouts.

Analyst questioned the path to higher ROA, and management provided a specific target range and timeline for improvement.

Asked by Jay Mundra

Credit Card Business Decline and Retail Slippages Direct
from March of 2024 onwards, fresh issuances have been stopped... majority of the losses that we had in the new book, roughly half of it is from the credit card business and a small portion of it is also from our portfolio buyout... Rs.17 crores is from portfolio purchases made, which is actually quite a small portfolio.

Analyst raised concerns about the declining credit card portfolio and sources of retail slippages, prompting management to detail the reasons and breakdown of losses.

Asked by Parth M

Housing Finance De-growth Rationale Direct
yields on housing finance, especially prime housing finance have dropped to a very, very low level with nationalized banks now operating at 7.1% and some of them are even sub-7%... we did lose volume in December. And I think, frankly, strategically, we have to decide at what levels we wish to participate here.

Analyst questioned the de-growth in housing finance, and management explained it as a strategic decision due to intense price competition from nationalized banks.

Asked by Suraj Das

MSME Growth Drivers and Digitalization Direct
MSME growth is actually quite broad-based... The MBG piece is the one that we are more keen on growing because the yields there give us a clear NIM of 400 to 500 basis points... templatized mode where we have credit scores that run, and these are all digitally underwritten and they have reasonably quick turnaround times.

Analyst sought details on MSME growth, and management elaborated on the broad-based nature, focus on high-yield MBG segment, and digital underwriting capabilities.

Asked by Suraj Das

3 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

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 and Capital Adequacy Improvements

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.

Net Interest Margin and Profitability Outlook

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.

Loan Book Growth and Segment Focus

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.

Competition and Strategic Adjustments

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.

Digital Transformation and Branch Expansion Strategy

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.

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