Skip to content

    South Ind.Bank

    SOUTHBANK
    Financial Services·16 Jan 2026
    Management Summary

    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.

    Highlights

    5

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

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

    • Gross advances grew 11.3% YoY to Rs.96,764 crores (12.4% if adjusted for Rs.900 crores write-off in March 2025).

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

    • Gross NPA reduced by 163 bps YoY to 2.67% and Net NPA reduced by 80 bps YoY to 0.45%.

    Concerns

    3

    • Credit card business issuances stopped since March 2024 due to external counterparty issues, leading to a declining book.

    • Housing loan growth is volatile due to intense price competition, with yields dropping to very low levels.

    • The full impact of the 25 basis points repo rate reduction will be felt this quarter, potentially creating marginal downward pressure on NIM.

    Key financials

    Single quarter

    24 metrics
    1. 01Net Profit₹374 Cr+9%YoY
    2. 02Total Deposits₹1.18L Cr+12%YoY
    3. 03Gross Advances₹96,764 Cr+11.3%YoY
    4. 04Pre-provisioning Operating Profit₹585 Cr+11%YoY
    5. 05NIM2.9%+0.1%QoQ

    Guidance & targets

    9
    CategoryTargetPriority
    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

    NIM Trajectory

    Next quarter and going forward
    Current2.86% (up 6 bps QoQ)
    TargetStabilized and climbing

    Why it matters

    NIM sustainability and growth are crucial for the bank's core profitability, especially after absorbing rate reductions.

    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.

    How to verify

    key_financials.metrics[label='NIM']

    Risks & concerns

    4
    RiskSeverity

    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 acknowledged

    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 acknowledged

    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 acknowledged

    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 acknowledged

    medium

    Q&A highlights

    8

    “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.”

    Management confirmed achieving and maintaining its loan growth guidance, providing clarity on the impact of prior write-offs.

    asked by Digant Haria

    2 min read6 chapters

    Detailed Narrative

    01

    Robust Financial Performance in Q3 FY26

    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.

    02

    Significant Improvement in Asset Quality and Margins

    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.

    03

    Strategic Growth in Key Segments and Digital Initiatives

    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.

    04

    NIM and ROA Outlook and Portfolio Rebalancing

    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%.

    05

    Credit Cost and Capital Adequacy

    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.

    06

    Challenges in Credit Card and Housing Loan Segments

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.