South Ind.Bank Q2 FY27 Earnings Call — Analysis (NSE: SOUTHBANK)
South Indian Bank delivered record quarterly PAT of ₹426 Cr (+21% YoY) alongside pristine asset quality with Net NPA at 0.09% and NIM expanding to 3.33%.
Result quality: strong — Earnings grew. Management sentiment: optimistic.
The take
Q2FY27 Net Interest Income ₹1,116 Cr ( +38% YoY ) . Guidance raised — approx FY29 cost to income ratio 50% . But walked back . New story: Deposit repricing tailwind .
Results
Net profit rose 21% YoY to ₹426 Cr; NII jumped 38% YoY to ₹1,116 Cr with NIM expanding 53 bps YoY to 3.33%, while Gross NPA improved to 1.24% and Net NPA dropped to 0.09%.
Financial highlights
| Metric | Value | Change | Basis |
|---|---|---|---|
| Net Profit | ₹426 Cr | +21% | yoy · Q2FY27 · vs ₹351 Cr in Q2FY26 |
| Net Interest Income | ₹1,116 Cr | +38% | yoy · Q2FY27 · vs ₹808 Cr in Q2FY26 |
| Net Interest Margin | 3.33% | +53bps | yoy · Q2FY27 · vs Q2FY26 (+10bps QoQ) |
| Total Deposits | ₹137,279 Cr | +19% | yoy · Q2FY27 · vs ₹115,635 Cr in Q2FY26 |
| Gross Advances | ₹109,517 Cr | +19% | yoy · Q2FY27 · vs ₹92,286 Cr in Q2FY26 |
| CASA Deposits | ₹43,310 Cr | +18% | yoy · Q2FY27 · vs ₹36,841 Cr in Q2FY26 |
| Gross NPA Ratio | 1.24% | -169bps | yoy · Q2FY27 · vs 2.93% in Q2FY26 |
| Net NPA Ratio | 0.09% | -47bps | yoy · Q2FY27 · vs 0.56% in Q2FY26 |
| Provision Coverage Ratio (incl. write-offs) | 97.84% | +759bps | yoy · Q2FY27 · vs 90.25% in Q2FY26 |
| Capital Adequacy Ratio (CRAR) | 19.40% | point_in_time · Q2FY27 · as of Sep-26 (Tier 1 at 18.71%) |
Guidance
Management guided for 15-16% loan and deposit growth in FY27, targeting medium-term NIM of 3.40-3.50% and RoA scaling towards 1.25-1.30%.
What management committed to
- We should move towards 3.45 to 3.50... that is what the guidance for [NIM]. — 3.45%-3.50%, FY28+
- Medium-term target will be to reach 1.25% to 1.30% [ROA]. — 1.25%-1.30%, ~FY28
- We have been talking about a 35% kind of a range for corporate and 65% of range for [retail, agri, MSME]. — 35%
- Bank already is targeting to take [gold loan share] up to 35%... focus will be to take it up to 30%, 32% levels immediately. — 30-32% immediate / 35% first phase, H2FY27 / FY28
- On an average, we expect that INR50 crores to INR55 crores to continue [for recovery income from written-off pool per quarter]. — INR50-55 Cr/quarter, H2FY27 onwards
- Cost-to-income ratio coming down to 50%... going forward [in 2 years]. — 50%, approx FY29
- We should expect around 16% kind of a growth [for loans and deposits for FY27]. — ~16%, FY27
Key themes
Asset quality cleanup and margin expansion
How the narrative shifted
- Deposit repricing tailwind: Deposit repricing continues to compress cost of funds, providing foundational support for NIM expansion toward 3.5% as the bank benefits from lower-rate term deposit roll-offs.
- CASA growth strengthening funding profile: bullish
Operational commentary
- Gold loan portfolio expanded 41% YoY, reaching ~25% of total advances (split roughly 60% retail gold / ₹15,000 Cr and 40% agri gold / ₹10,000 Cr) with blended yields near 10%.
- Loan book mix stood at 39% Corporate and 61% RAM (Retail, Agri, MSME), with strategic target to rebalance to 35% Corporate and 65% RAM.
- Branch network expansion continued with 11 branches added in H1FY27 alongside selective hiring and IT investments.
- Floating-rate loan composition comprises 43% EBLR-linked (Repo/T-Bill split roughly 23%/20%), 5% MCLR, and 47% fixed rate.
- Board approved ₹500 Cr Tier-2 bond issuance, though management noted no urgent need for core equity dilution given strong 19.40% CRAR.
- Quarterly deductions from GNPA totaled ₹188 Cr, consisting of ₹73 Cr recovery from technical write-offs, ₹55 Cr standard GNPA recoveries, ₹58 Cr cash recoveries, and ₹34 Cr technical write-offs in credit cards.
Analyst Q&A
Q. What drove the sharp 20% QoQ increase in current account balances and will it sustain?
Management clarified that CA growth was partly driven by temporary one-off inflows related to IPO collections at the end of September, which may see minor slippage, though baseline deposit and CASA trends remain healthy.
Q. What is the expected impact from IRDAI's draft bancassurance circular and the outlook for fee income?
Third-party banca income is only 5-7% of total fee income, so circular impact will be minimal; core fee momentum is expected to sustain and improve.
Q. How prepared is the bank for Expected Credit Loss (ECL) provisioning and what is the expected quantum?
Impact is expected to be modest given industry-low SMA and Net NPA numbers; decision on adopting RBI's glide path vs upfront adoption will be taken once final guidelines are out.
Q. What is the sensitivity of the bank's treasury book to bond yield movements?
Management indicated an MTM impact of approximately ₹1.0-1.1 Cr per basis point change in benchmark yields.
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