KOCHI: South Indian Bank's five-year effort to repair its balance sheet is beginning to pay rich dividends, with the Thrissur-based private-sector lender reporting a 17 per cent rise in June-quarter net profit after shrinking its gross bad-loan pile by nearly 80 per cent—from Rs4,677.12 crore (8.02 per cent) at the end of June 2021 to about Rs930 crore (1.38 per cent) as of June 30, 2026.
The dramatic improvement in asset quality enabled the bank to slash provisions and contingencies by 65 per cent to Rs84 crore during the quarter, helping net profit rise to Rs378 crore from Rs322 crore a year earlier.
The lower credit cost more than offset weaker operating performance and a sharp fall in treasury income.
The bank's operating profit declined 12 per cent year-on-year to Rs592 crore from Rs672 crore, while total income slipped to Rs1,404 crore from Rs1,454 crore.
Treasury and forex income plunged 83 per cent to Rs44 crore from Rs256 crore in the corresponding quarter last year, when the bank had benefited from unusually strong gains on its investment portfolio.
NII up 23%
Net interest income (NII), however, continued its healthy trajectory, rising 23 per cent to a record Rs1,025 crore from Rs833 crore a year earlier, supported by robust credit growth and improved lending yields.
Managing Director and Chief Executive Officer P R Seshadri said the bank delivered another quarter of strong operational performance, driven by healthy loan growth, stable margins and continued improvement in asset quality. He said the bank remained focused on disciplined growth, prudent risk management and delivering sustainable value to stakeholders.
The June-quarter numbers underline the extent of South Indian Bank's balance-sheet transformation over the past five years. Gross NPAs have fallen to 1.38 per cent from 8.02 per cent, while net NPAs have declined to 0.26 per cent from 5.05 per cent over the same period.
The provision coverage ratio (PCR), including technical write-offs, has strengthened to more than 94 per cent, reflecting the bank's aggressive clean-up of stressed assets.
Despite the encouraging earnings, the quarter also highlighted a key challenge facing the bank. Deposits grew 11 per cent year-on-year to Rs1.15 lakh crore, while gross advances expanded at a much faster 19 per cent to Rs92,273 crore. Sustaining higher loan growth without matching deposit mobilisation could put pressure on funding costs in the coming quarters.
Gold loans
The bank has, however, continued to improve the quality of its loan book. Gold loans remained one of the fastest-growing segments, while mortgage lending also recorded strong growth. In the corporate portfolio, almost the entire loan book is now rated A and above, marking a significant shift from the stressed corporate exposures that had weighed on the bank's performance in the past.
For investors, the latest quarter suggests that South Indian Bank is now entering a new phase of its turnaround. While extraordinary treasury gains are unlikely to recur and operating earnings came under pressure during the quarter, the sharp reduction in bad loans and provisioning costs is beginning to provide a more durable foundation for profitability.
