South Indian Bank share price rallies after double-digit growth in Q1 gross advances; should you buy?

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South Indian Bank shares rally on Wednesday after it posted healthy growth in Q1 gross advances and deposits. The shares jumped more than 3.5% on BSE. Following the Q1 update, brokerage ICICI Direct has recommended buying this Kerala-based private sector bank with a potential upside of over 13% going forward.

At the time of writing, South Indian Bank's shares traded at an intraday high of ₹20.44 apiece, up by 3.55% on BSE. On the previous day, the bank's shares stood at ₹19.74 apiece. In June 2023 quarter, the bank's gross advances stood at ₹74,107 crore, up by 14.53% from ₹64,704 crore in Q1 of the previous fiscal.

Total deposits stood at ₹95,524 crore in Q1FY24 as against ₹88,196 crore in Q1FY23, registering a growth of 8.31%. Further, in Q1, CASA came in at ₹31,171 crore up by 2.76% YoY. However, the CASA ratio contracted by 176 basis points to 32.63% versus 34.39% in Q1FY23.

For the bank, in its research note dated July 3, ICICI Securities analyst Vishal Narnolia said, "Expect credit growth in-line with industry at 12-13% in FY24-25E. Steady liabilities mix, repricing of ~65% of deposits, launch of new retail products & focus on high-yielding segment (currently at ~3.6%) is seen to drive ~10-20 bps improvement in margins. Gradual improvement in efficiency (~80-100 bps improvement in CI ratio) and moderation in net slippages (expected below 1% & NNPA below 1.5%) is seen to drive RoA to ~0.8% on a conservative basis in FY24-25E." Also, Narnolia added, "With business transformation imbibed in the business process, transition in leadership is expected to remain smooth with continued traction in growth and profitability.