South Indian Bank Ltd (SOUTHBANK) Q2 FY27 Earnings Call: Posts Record Rs. 426 Cr Profit, NIM Guided to 3.45-3.50%

South Indian Bank Ltd held its Q2 FY27 earnings call on October 15, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record Profit on Sharp NII Acceleration

• Highest-ever quarterly net profit of Rs.426 crores — reported in Q2 FY 2026-2027, up 21% YoY, driven by record net interest income of Rs.1,116 crores, up 38% YoY.
• Total business grew 19% YoY to Rs.2,46,796 crores — deposits at Rs.1,37,279 crores and gross advances at Rs.1,09,517 crores in Q2 FY 2026-2027.
• NIM of 3.33% — up 53 bps YoY and ahead of the 3.25% guided for H1 FY 2026-2027; RoA and RoE reported at 1.08% and 12% respectively (reported ROA of 1.10% was also cited on the call).
• Capital adequacy at 19.40% — as of Q2 FY 2026-2027; management stated no immediate equity capital raising is planned for FY 2026-2027, with the Board permitting Rs.500 crores in Tier 2 bonds for FY 2026-2027.
• Management attributed the strong quarter — to the previous MD & CEO, P. R. Seshadri, and guided continued momentum in disbursements and collections for the remaining quarters of FY 2026-2027.

Lowest-in-Industry NPAs, Deliberate PCR Buffer

• Gross NPA improved 169 bps YoY to 1.24% — and Net NPA improved 47 bps YoY to 0.09% in Q2 FY 2026-2027; Provision Coverage Ratio (incl. write-off) strengthened to 97.84%.
• PCR rose to 92% from 81% in Q1 FY 2026-2027 — via account-based provisions of ~Rs.70-80 crore, implying a credit cost of ~60 bps (analyst estimate); management cited conservatism, not asset quality stress, and said SMA/NPA ratios are among the lowest in the industry.
• Rs.188 cr deduction in Gross NPA movement — in Q2 FY 2026-2027 comprised Rs.73 cr recoveries from technical write-offs, Rs.55 cr from the standard GNPA pool, and Rs.58 cr from other cash recoveries; technical write-offs were Rs.34 cr, entirely from the credit card portfolio. Management did not provide the upgrades breakdown or Q1 FY 2026-2027 comparable data.
• ECL glide path deferred — management said it is too early to decide on ECL implementation (as of Q2 FY 2026-2027), but guided that the total quantum of requirement is not substantial given current low SMA and net NPA levels and adequate provisions.
• Limited room for further NPA reduction in H2 FY 2026-2027 — management expects income growth instead from improving other business parameters.

NIM Beat with a Multi-Quarter Glide Path

• Short-term NIM guided to 3.36-3.38% — with a 4-quarter target of 3.45-3.50% and medium-term ROA guided to 1.25-1.30%; management also aspires to 3.40-3.50% NIM over the medium-to-long term (period unspecified) and a long-term ROA target of 1.5% (period unspecified).
• ~43% of loans EBLR-linked — (roughly 20% T-bill and 23% repo linked), 5% MCLR-linked and 47% fixed rate; with 25-30% of loans in gold, management expects a positive NII impact from rate hikes in FY 2026-2027.
• 25 bps repo rate hike passed through — to corporate loans, lifting new corporate booking yields by 25-30 bps in Q2 FY 2026-2027; no spread hike was taken on gold loans, though management indicated readiness to adjust if needed.
• Treasury yield hardening from 6.80% to 7.19% — in Q1 FY 2026-2027 had minimal impact, with every basis point change translating to ~Rs.1.1 crore; management clarified a 1 basis point yield movement impacts MTM gains/loss rather than NII.
• AFS reserve debit balance of Rs.43 crores — as of 30 September Q2 FY 2026-2027, reflecting a hit of Rs.50 to Rs.53 crores during the quarter (CFO Vinod Francis).
• Interest expense growth moderated to ~5% — in Q1 and Q2 FY 2026-2027, lower than peers in Kerala/South India, driven by repricing of high-rate deposits contracted in FY 2025-2026; management guided the cost of funds should not materially increase in H2 FY 2026-2027.

RAM Shift Continues, Gold Loans Lead

• Corporate advances share declined to 39% from 40% — in Q2 FY 2026-2027, with RAM (retail, agri, MSME) at 61% of the portfolio; management guided the gradual shift towards RAM will continue (FY 2026-2027 onward) to build a better balanced portfolio with stronger risk-adjusted returns.
• Analyst flagged that corporate and gold loans drove ~80% of incremental growth — in Q2 FY 2026-2027, with corporate at ~40% of the mix; management acknowledged the aspiration to increase RAM share to 65% (period unspecified) but admitted the segment shift remains a challenge reliant on MSME verticals firing up.
• Gold loan book grew 41% YoY in Q2 FY 2026-2027 — to Rs.26,000 cr (25% of portfolio), targeting a 30-32% share near-term; composition is 60% retail / 40% agri, with a blended yield of ~10% and a ~25 bps retail premium over agri, driven by RBI restrictions on agri lending.
• Loan and deposit growth guided at 15-16% for FY27 — with management expecting to reach the higher end (~16%) and outperform the market if needed; priority segments are business loans and MSME loans, with personal loans also retained.
• Disbursement growth led by retail segments — (MSME, retail, agri), which outperformed the wholesale segment in Q2 FY 2026-2027.
• CA balances grew 20% QoQ — in Q2 FY 2026-2027, attributed to one-off IPO flows; management flagged potential slippage in H2 FY 2026-2027.

Other Income Sustainability and OpEx Discipline

• Rs.190 crore other income in Q2 FY 2026-2027 is sustainable — per the CFO, though the Rs.50-55 crore quarterly recovery component may decline after 4-5 quarters, offset by bank assurance income; the CFO guided FY27 recovery income faces no major threat but expects a structural decline to Rs.50-55 cr average for FY28+, while Rs.30-35 cr bank assurance income is sustainable.
• Minimal impact from the draft bank assurance circular — as third-party income constitutes only 5-7% of total fee income; core fee income momentum is expected to sustain in H2 FY 2026-2027.
• Cost-to-income ratio target of ~50% — over the next two years (FY 2027-2028 – FY 2028-2029), with cost growth from employee additions and branch expansion in FY 2026-2027 expected to be offset by income growth.
• Costs guided stable in FY 2026-2027 — despite growth-driven employee additions and branch expansions (11 branches opened in H1 FY27), with income growth expected to outpace costs; OPEX growth will trail loan growth, with no major tech overhaul planned beyond AI refinement.
• Higher OpEx acknowledged for the next level of growth — (FY 2026-2027 onward), with management committing that incremental operating profits will always exceed the incremental OpEx.
• Three ROA priorities for FY 2026-2027 — continuing the portfolio mix shift by shedding lower-yielding advances for higher-yielding ones, achieving sustainable advances growth, and focusing on gold loans.

Growth First, Capital Contingent

• Growth is the immediate priority for H2 FY 2026-2027 — with future capital requirements contingent on achieving growth targets.
• ROA expected to inch up from 1.1% to 1.20-1.25% by FY28 — with a longer-term target of 1.5% over 2-3 years; excluding the one-off PCR strengthening provisions, Q2 FY 2026-2027 ROA would have been ~1.3%.
• Deposit repricing in H2 FY 2026-2027 at lower rates — than the previous year, limiting cost pressure; management utilized lower bulk deposit rates in Q2 FY 2026-2027 following FCNRB liquidity increases.
• FCNR deposits at ~$239 million — with 95-96% direct (non-leveraged).
• IBPC book retained if it makes business sense — per MD & CEO Mahesh Muralidhar Pai, but exiting entirely in Q3 FY 2026-2027 would be very challenging.
• No changes to branch structure or underwriting strategy — management opted to strengthen the existing ecosystem rather than overhaul it.