South Indian Bank conducted a conference call on 25 January 2023 to discuss its financial results for the quarter ended December 2022. Murali Ramakrishnan, MD&CEO of the bank addressed the call:

Highlights:

The bank has recorded 9% growth in the Casa deposits to reach Rs 30660 crore And December 2022. The CASA ratio improved 186 bps from 27.81%  end December 2021 to 33.81%  end December 2022.

The net interest margin of the bank has jumped to 3.52% in Q3FY2023 from 2.64% in Q3FY2022

The provision coverage ratio has jumped by 643 bps yoy to 74.51% end December 2022 from 68.08% end December 2021.

The bank has reduced GNPA ratio to 5.48% and Net NPA to 2.26% end December 2022. The bank aims to reduce GNPA to 5% and NNPA to 2% by March 2023.

SMA2 book has declined by 48% yoy to Rs 697 crore end December 2022 from Rs 1330 crore end December 2021.

The bank has built a new loan book of Rs 37,748 crore from October 2020 with GNPA of 0.06% & SMA2 of 0.22%.

The bank has created provision of Rs 312 crore for aging provision to be maintained by banks on all Security Receipts received prior to March 2017. This has impacted the treasury income of the bank in Q3FY2023 leading to treasury loss of Rs 288 crore.

The bank has a balance securities receipt of Rs 1455 crore against which the bank is holding provisions of rupees 1242 crore leaving net outstanding securities receipts of Rs 215 crore. The bank is required to make further aging provisions of Rs 48 crore on securities receipt by March 2023 and another Rs 15 crore in FY2024.

The business volume of the bank increased 9% to Rs 160789 crore end December 2012 and  advances have increased 18% to Rs 70117 crore. 

The bank has recorded disbursements of Rs 36957 crore in 9MFY2023 up from  Rs 16861 crore in 9MFY22 led by corporate Rs 20413 crore (Rs 7613 crore), gold Rs 8269 crore (Rs 5207 crore), business segment Rs 4735 crore (Rs 1841 crore), other retail Rs 904 crore (Rs 710 crore), personal loans Rs 1047 crore (Rs 424 crore), agriculture Rs 503 crore (Rs 379 crore), LAP Rs 218 crore (Rs 246 crore), home loans Rs 683 crore (Rs 340 crore), vehicle loans Rs 185 crore (Rs 101 crore).

Gold loans continue to grow consistently registering a growth of 32% to Rs 13053 crore against Rs 9862 crore end December 2021. The gold loan LTV was 81.4% and ticket size of Rs 1.5 to 2 lakh.

The bank is witnessing strong traction in the personal loan book rising to Rs 1046 crore.

The bank has issued 187694 credit cards since inception with monthly average spends of Rs 24561. The credit cards outstanding have increased to Rs 670 crore end December 2022.

Share of A & above rated large corporates improved from 82% in December 2021 to 95% in December 2022.

The disbursements in the SME segment have picked up to a monthly rate of Rs 525 crore in 9MFY2023 from Rs 200 crore per month in 9MFY2022.

The bank is looking at double digit loan growth for FY2023. The bank aims to grow in every segment and build a high quality loan book.

NRE deposits accounted for 31% of total deposits.

Net interest margin stood at 3.17% in 9MFY2023 and the bank aims to improve the net interest margin to 3.2% in FY2023. As per the strategy document, the net interest margin  is targeted at 3.5% for FY2023. The net interest margin has jumped to 3.52% in Q3FY2023 supporting a 44% surge in the net interest income for the quarter.

The provision coverage ratio (PCR) improved by 643 bps yoy to reach 74.51% end December 2022 against 68.08% end December 2021. The bank aims to improve PCR to 75% by March 2023.

Capital adequacy position continued to be robust with CRAR of 16.25% and Tier I ratio of 13.71% end December 2022.

The bank has witnessed zero slippages in the new corporate book built since October 2020.

The fresh slippages of loans have declined to Rs 320 crore in Q3FY2023 from Rs 387 crore in Q2FY2022.

The restructured loans book of the bank has declined to Rs 1781 crore which consists of business loans of Rs 920 crore, personal loans of Rs 277 crore, agriculture loans of Rs 49 crore and corporate loans of Rs 526 crore. The bank is holding provision of Rs 568 crore against restructured loan book.

The bank has witnessed sharp 88% decline in the provisions to Rs 41 crore due to low slippages and better recoveries.

The cost of funds was up by 4 bps in Q3FY2023.

The SMA 1 loan book stands at Rs 1200 crore SMA 2 loan book at Rs 697 crore end December 2022.

The ECLGS loan book stands at Rs 2007 crore, of which NPA stands at Rs 141 crore end December 2022.

The bank had targeted slippages of Rs 1600 crore for FY2023, of which Rs 1000 crore were expected from regular book and Rs 600 crore restructured loan book of Rs 2400 crore end March 2022.

The bank has witnessed slippages of Rs 1105 crore in 9MFY2023 and expected another slippages of Rs 400 crore in Q4FY2023 leading to overall slippages of Rs 1500 crore for FY2023 against an estimate of Rs 1600 crore.

The bank is targeting fresh slippages of Rs 1800 crore for FY2024. The bank is expecting a slippage rate of 1.25-1.30% for the existing book and 25-30% slippage rate for the restructured book.

The PCR excluding technical write off has improved to 60.2% from 48.01% a year ago and the bank aims to improve this to 62-63% by March 2023 and 70% by March 2024.

The bank expects recoveries and upgradations of Rs 1700 crore in FY23 and Rs 2000 crore in FY24.

The bank has recorded redemption of Rs 5.3 crore in Q1FY22, Rs 3.7 crore in Q2FY22, Rs 23 crore in Q3FY22, Rs 42 crore in Q4FY22, Rs 42 crore Q1FY23, Rs 54 crore Q2FY23 and Rs 39 crore Q3FY23.

The GNPA of the bank stands at Rs 3844 crore of which GNPA relating to the old loan book is Rs 3805 crore. Also, there is credit loss on NPAs of new loan book in credit cards and gold loans.

Of the SMA 2 loan book of Rs 697 crore SMA2 of old loan book is Rs 613 crore.

The bank spends Rs 180-200 crore on investment in technology annually.