South Indian Bank expects FY27 credit growth of 16-17%, beating its prior guidance. Managing Director Mahesh Muralidhar Pai said, "We have already exceeded that on the credit side." The lender sees stable asset quality and improved profitability ahead. It also mobilised $239 million in FCNR deposits to support this healthy demand.
South Indian Bank expects FY27 credit growth of 16-17%, beating its prior guidance, driven by healthy loan demand. The lender anticipates improved profitability and stable asset quality while ruling out any strategic capital raise at this stage.
South Indian Bank expects to end the financial year 2026-27 with credit growth of 16-17%, higher than its earlier guidance of 15-16%, as loan demand remains healthy across segments.
The lender also expects gradual improvement in profitability and net interest margins while maintaining stable asset quality, according to Managing Director & Chief Executive Officer Mahesh Muralidhar Pai.
Pai said the bank has already exceeded its original growth guidance on the credit side and expects the momentum to continue through the remainder of the financial year. The bank has also mobilised $239 million in FCNR deposits, which have been deployed towards lending.
South Indian Bank reported 19% credit growth and 15% liability growth during the July-September 2026 quarter. Despite higher provisioning during the quarter, Pai said the increase was driven by a conservative approach rather than any deterioration in asset quality.
South Indian Bank shares were trading at ₹50.84 on the NSE at 11:59 am. The lender has a market capitalisation of ₹13,307.08 crore, while the stock has gained over 54% in the last one year.
Pai said the bank's 41% year-on-year growth was driven primarily by customer additions rather than higher gold prices in terms of gold loans.
Pai also clarified that South Indian Bank is not evaluating any strategic capital raise or strategic investor at this stage.
Let's just start with your outlook on credit and deposit growth in light of all the FCNR flows that have come in. How do you think you will end the year? Could you do better than initially anticipated?In terms of deposits and credit growth, we are currently at around 19% credit growth, and we are at 15% liability growth. We have given a guidance of around 15% to 16%. We have already exceeded that on the credit side. I feel that the year will end slightly better than what we have already guided, which was 15% to 16%. We should end up somewhere closer to 16% to 17%. In terms of FCNR flows, the bank has got $239 million in FCNR deposit inflows, which is reasonably good considering that we do not have an overseas presence or that leverage advantage. So, it is a pretty decent number for a smaller bank, and we have deployed that towards credit as of now.Your asset quality has seen an improvement quarter-on-quarter, and that's been the trend here. I wanted to understand the reason behind the big jump in provisions. Are you setting aside some money for stress that you are seeing building up, or are you making extra provisions for ECL? What is driving that rise?There is no stress in the books. If you can see, my net NPA is currently one of the lowest in the industry, so there is no stress in the books. At 0.09%, with an absolute number of just over 100, there is no indication of any stress in the books across any of the sectors. Yes, the provision numbers have been a little higher compared to the previous quarter. That is because of the cautious approach we have taken. Otherwise, there is no stress in the books. SMA numbers are very low. They are among the lowest in the industry. You can see that as far as SMA and SMA-I are concerned, even in absolute terms.As we speak, we see a mild spike in your credit cost. Nothing really to worry about. 0.09% has turned to about 0.14%. So that is exactly the outlook we'd like to understand for this year. If you could give us a sense of what you are targeting for your credit cost. At the same time, if you could also give us a target for your return on assets. And in a rising interest rate scenario, what are the kind of NIMs and treasury losses that you're expecting on your books?In terms of credit cost, currently it stands at 0.14%. There is a mild uptick from the base number. We can't go much below this, as it is already one of the lowest in the industry. Our aim is to maintain it at around the same level. So, our credit cost guidance remains the same as the current level. We will be in this range only. There will not be any uptick from here on. Coming to the return on assets, currently it stands at 1.10%. So, the medium-term guidance should be around 1.18% to 1.20%. That's what we are trying to achieve in terms of return on assets. In terms of NIM, if you look at the last eight quarters, the bank has been showing consistent improvement, and currently it is standing at 3.33%. I believe that the repo rate hike, which took place recently, and the business mix we are trying to build at South Indian Bank should help us achieve a NIM of around 3.36% to 3.37% in the short term. Our aim is to improve it further to around 3.40% to 3.45%. That is the guidance we can provide, and it is better than the guidance we had given earlier.What about treasury income with bond yields rising? What is the kind of impact you expect over the next couple of quarters?This is a tough call for all market participants because we were at the 7.17% to 7.19% range when the market closed on September 30. Currently, we are at around 7.40%. So, if yields continue to spike, the entire market will face some challenges in terms of the numbers. But having said that, I believe the spike has largely been driven by West Asia conflict and US bond yields. So, we should see this flattening out. Maybe 7.40% to 7.45% should be the upper cap, even considering one or two more RBI rate hikes. I don't see this having much of an impact on South Indian Bank's balance sheet.From a South Indian Bank perspective, could you give us a rule of thumb? For every 10-basis-point increase in yield, how much could your treasury income decline?As a rule of thumb, we have around ₹1 crore to ₹1.5 crore for every one-basis-point move. So typically, a 10-basis-point move makes it around ₹10 crore to ₹11 crore.So, two very quick things. First, on the gold loans. There's 41% year-on-year growth. If you could give us a sense of whether you're able to add new customers, or whether a lot of it is also because of the rise in prices. And with the kind of correction we've been seeing recently, what happens to this kind of growth? Secondly, for South Indian Bank, are you looking at any kind of strategic capital, or bringing in any strategic investors? Is any of that on the table?First, about the gold loan, the growth appears higher because we have a lower base. If you consider the overall loan book, there is still a lot more to do in the gold loan portfolio. It is not only because of the price rise we have seen, because gold prices have come down. If you see the levels from January-February to today, the prices used for gold loan bookings have come down significantly. So, it's not only on account of higher prices. The bank is definitely adding new customers to the gold loan portfolio. That is why the growth is 41%, and we will continue to do that. In terms of capital or strategic investment, at this point in time, we are not looking at any of those things.