💰 Financial Performance

Revenue Growth by Segment

Treasury revenue grew 9.6% to Rs. 2,204.18 Cr; Corporate/Wholesale Banking grew 22.4% to Rs. 3,646.52 Cr; Retail Banking grew 3.8% to Rs. 4,883.01 Cr; Other Banking Operations grew 13.3% to Rs. 493.03 Cr (all FY25 figures).

Geographic Revenue Split

Over 66.6% (two-thirds) of the bank's advances portfolio is concentrated in Southern India, primarily Kerala.

Profitability Margins

Net Interest Margin (NIM) stood at 2.8% for Q2 FY26. Return on Assets (ROA) was 1.02% and Return on Equity (ROE) was 13.11% for the September 2025 quarter. FY25 ROA improved to 1.06% from 0.93% YoY.

EBITDA Margin

Operating profit for Q2 FY26 was Rs. 535 Cr. Operating profit as a percentage of Working Funds increased to 1.85% in FY25 from 1.62% in FY24, reflecting improved core profitability.

Capital Expenditure

The bank raised Rs. 1,151 Cr in equity capital via a rights issue in FY24 to support growth. While specific future capex is not disclosed, the bank is investing in new LOS systems for Retail/MSME and technology infrastructure upgrades.

Credit Rating & Borrowing

Upgraded to IVR AA/Stable (Infomerics) from IVR AA-/Stable. The bank maintains a comfortable capital adequacy ratio (CAR) of 17.70% (Tier-1 at 16.79%) as of September 30, 2025.

⚙️ Operational Drivers

Raw Materials

Primary inputs are Deposits (CASA and Term Deposits). Total deposits grew 10% YoY to Rs. 115,635 Cr. CASA balances increased 10% YoY to Rs. 36,841 Cr.

Import Sources

Not applicable for banking; sourced from retail and corporate depositors across India, primarily in the Southern region.

Key Suppliers

Retail and Corporate depositors (Total Deposits: Rs. 115,635 Cr).

Capacity Expansion

Advances grew 9% to Rs. 92,286 Cr. Expansion is focused on branch productivity and digital channel efficiency rather than physical branch count growth.

Raw Material Costs

Interest expense on deposits is the primary cost. The bank raised term deposit rates to narrow the funding gap as credit growth outpaced deposit mobilization.

Manufacturing Efficiency

Profit per employee increased by 27.6% to Rs. 14.15 lakhs in FY25 from Rs. 11.09 lakhs in FY24. Branch productivity has seen a material increase through process improvements.

📈 Strategic Growth

Expected Growth Rate

15-18%

Growth Strategy

The bank aims to achieve growth by shifting its portfolio mix from Corporate (41%) toward higher-margin MSME (targeting 15-18% growth) and Retail segments. It has already churned 80% of its portfolio since 2020 to improve quality. Strategy includes enhancing branch productivity, granularizing the portfolio through 'frictionless' digital processes (LOS systems), and growing gold loans (Rs. 16,982 Cr, up 9% YoY).

Products & Services

Gold loans, MSME advances, Corporate loans, Personal loans, Credit cards, Savings and Current accounts.

Brand Portfolio

South Indian Bank

New Products/Services

Controlled growth of Credit Cards and Retail Personal Loans to diversify revenue streams.

Market Expansion

Focus on growing non-branch distribution and leveraging partnerships to expand reach beyond traditional Southern strongholds.

Strategic Alliances

Leveraging partnerships for non-branch distribution and digital channel expansion.

🌍 External Factors

Industry Trends

The Indian banking sector is seeing credit growth outpace deposit mobilization, leading to higher term deposit rates. The MSME sector specifically grew 20% YoY to Rs. 40 trillion. Regulatory shifts include the RBI's focus on digital payments, fintech regulation, and the adoption of the 2023 Investment Portfolio framework.

Competitive Landscape

Competition from Scheduled Commercial Banks (SCBs) and NBFCs, particularly in the gold loan and MSME segments.

Competitive Moat

The bank possesses a durable moat through its long operational history (since 1929) and an established retail depositor base (Rs. 115,635 Cr). Its competitive advantage is reinforced by a strong capital position (17.70% CAR) and improved asset quality, with networth coverage for net NPAs increasing to 17.6 times in June 2025 from 12.8 times in March 2025.

Macro Economic Sensitivity

Sensitive to RBI interest rate cycles and MSME sector health. MSME credit demand in India grew 20% YoY, directly benefiting the bank's target growth segment.

Consumer Behavior

Shift toward digital banking and granular credit products like gold loans (Rs. 16,982 Cr) and personal loans.

Geopolitical Risks

Global interest rate volatility and geopolitical disruptions are noted as risks requiring strengthened risk management frameworks.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by the RBI Master Direction on Classification, Valuation and Operation of Investment Portfolio (2023) and Basel III capital requirements (mandated at 11.50%). The bank also follows RBI guidelines on MSME priority sector lending and digital payment security.

Environmental Compliance

The bank has developed ESG criteria for investments and lending as defined in its Environmental and Social Management System (ESMS) policy.

⚠️ Risk Analysis

Key Uncertainties

Key risks include the high regional concentration in South India (>66% of book) and the seasoning of the newly originated portfolio (80% churned since 2020), which may impact asset quality if economic conditions worsen. NIM compression remains a risk as deposit costs catch up to loan yields.

Geographic Concentration Risk

Over 66.6% (two-thirds) of the bank's advances portfolio is concentrated in Southern India, primarily Kerala.

Technology Obsolescence Risk

The bank is mitigating technology risks by investing in high-quality LOS (Loan Origination Systems) for Retail and MSME, adopting Data Science for risk measurement, and focusing on digital channels to drive operating efficiency.

Credit & Counterparty Risk

Asset quality has improved with Net Non-Performing Assets (NNPA) to Net Worth ratio at 8.10% as of March 2025, down from 13.38% the previous year. Net stressed assets to net worth also reduced to 12.11% from 22.59%.