Capitaline

Analyst Meet / AGM 09-Jul-20

Conference Call

South Indian Bank

Expects slippage ratio at 2% and credit cost Rs 1000 crore for FY2021

South Indian Bank conducted a conference call on 9 July 2020 to discuss its financial results for the quarter ended June 2020. VG Mathew, MD&CEO of the bank addressed the call:
Highlights:

The bank has been able to operate 98% of its branches and ATM across the country following the regulations and guidelines of the local authorities.
The bank had targeted to raise the provision coverage ratio of 60% in 6 month from the March 2020 level, while it has already touched 58% and the bank is eager to cross the 60% mark by September 2020.
The operating performance of the bank continues to be robust.
The bank has continued to expand its loan book in the non corporate segments such as retail, gold, agriculture and mortgage which currently forms more than 72% of the loan book.
The retail loan book of the bank has increased 10% driven by the segments such as mortgage, gold and auto loan segments
The bank has tied up with a few insurance companies and it is expecting good traction in the transaction and third-party fee income in the ensuing quarters.
The centralized processing, increased free income and improved productivity is expected to help reduce cost to Income ratio going forward.
The bank is holding covid related provisions of Rs 100.5 crore. The bank has created full 10% provisions for the loans overdues amounting to Rs 714 crore where the standstill benefit is given. The bank has created additional provisions of Rs 50.6 crore in Q1FY2021 against such loans taking total provisions to Rs 71.4 crore. The bank also holds another ad hoc provision of Rs 29.1 crore totaling to Rs 100.5 crore of covid related provisions, which are not used in the net NPA calculations.
The fresh slippages of loans stood at Rs 158 crore in Q1FY2021, which includes accounts relating to gems and jewellery sector with exposure of Rs 35, trading Rs 31 crore, construction Rs 10 crore etc.
The bank expects to contain a fresh slippage ratio below 2% at Rs 1000-1300 crore in FY2021. The bank expects a credit cost of Rs 1000 crore for FY2021.
The capital adequacy ratio of the bank at 13.49% is highest in the last 6 to 7 years. The bank would look at capital raising at an appropriate time.
The bank has a very little unsecured loan book and has a very strong collateral coverage for the secured loan book with a very long relationship.
The bank has a provision coverage of 63% on security receipts book which it feels to be comfortable.
The bank has generated one off income of Rs 31 crore from sale of PSLCs in the quarter ended June 2020.
The loan book under moratorium stands at 36% end June 2020.
As per the bank, about 8% customers have balances in their account to pay 1-2 EMIs, 5% of the customers have balances to pay 2-3 EMIs, while 21% of the customers have balances to pay more than 3 EMIs.
About 43% of the loan book comes from Kerala where the lockdown condition is superior and the bank is observing a pickup in activity across the sectors.
In the home loan segment, the loan book under moratorium stands at 75% while the SMA book stands at Rs 70 crore which is 1.28% of the overall home loan book.
In the other mortgage segment, 52% of the loan book is under moratorium and SMA book stands at Rs 69 crore or 1.31% of the book.
In the vehicle loan segment, 76% of the loan book is under moratorium while the SMA book stands at Rs 15% or 1.37%.
In the MSME loan book, 38% of the book is under moratorium and SMA book stands at Rs 48 crore or 0.29%
In the gold segment, the SMA book stands at mere Rs 0.04 crore.
In the personal loan segment, the SMA loan book stands at Rs 10 crore or 0.77%.
In the business loan segment, the SMA book stands at Rs 5 crore or 0.17%.
The bank has exhibited a sharp increase in the share of NRI deposits to 29.9% from 19% in March 2014.

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