South Indian Bank- weekly chart
Crossed the nearest resistance with very high volumes, indicating entry of institutions. Volumes in recent months have been life time high.
Price is the indicator and volumes are the weight of the evidence.
Relative strength vs the Bank nifty indicates out performance.
Coming to Fundamentals:-
- New book vs Old book mix. After the new MD joined in 2020, there has been a conscious focus on asset quality. Also sector level, credit risk has bottomed out after years of credit quality issues.
Here is the background of the new md & my industry checks indicate he is someone stringently focused on asset quality.
- Asset quality of the new book vs the old book. New book has higher Net interest margins and higher share of corporates that are A+ rated vs the legacy book.
NNPA of the new book is 0.01% vs 2.41%+ for the old book.
- Improving NIMs:
-Firstly, rate transmission to depositors has been slower. This has been true for the entire banking space, and will start normalising.
-Second part, which is much more structural. The new book that is built (33k crores) has higher yields, better NIMs, better quality. As the older book keeps getting churned, the newer books profitability will reflect. And overall NIMs should start looking sustainable.
Nims in newer book is 3.6%.
- Valuation:- Book value per share is already at Rs. 30. Key monitor able is net slippages in Q3FY23 result. If net slippages come in net negative, then all street estimates will get revised. Beats in expectations basically.
Disc: invested since Rs11.One of the top 5 allocations in the PF at the moment. Risks are huge too.