South Indian Bank conducted a conference call on 21 July 2023 to discuss its financial results for the quarter ended June 2023. Murali Ramakrishnan, MD&CEO of the bank addressed the call:

Highlights:

The bank has improved net interest margin by 60 bps to 3.34% in Q1FY2024.

The provision coverage ratio has improved by 643 bps yoy to 76.54% end June 2023.

The bank has reduced gross NPA ratio by 74 bps to 5.87% and net NPA by 102 bps to 1.85% end June 2023 over end June 2022.

The bank as also improved RoA to 0.73% and RoE to 11.8% in Q1FY24.

The bank has reduced SMA 2 loan book by 19% to Rs 888 crore end June 2023.

The grass NPA on the new loan book built from October 2020 stands at 0.16% and the SMA 2 loan book stands at 0.23% end June 2023.

The security receipt book stands at Rs 1378 crore with the provisions of Rs 1223 crore end June 2023. Thus the net security receipt book is at Rs 155 crore end June 2023.

The business of the bank has increased by 11% to Rs 1.69 lakh crore driven by 15% growth in the advances. The disbursements were at Rs 22108 of which corporate disbursements were at Rs 17000 crore, gold loans at 883 crore, business banking at Rs 997 crore and other retails at Rs 1028 crore.

The share of A+ rates corporate loan book in the new loan book has expanded to 96% from 91% last year.

The gold loan book has expanded by 21% to Rs 14478 end June 2023 with the LTV ratio of 83% and the ticket size of Rs 1.6 lakh.

The personal loan book of the bank has reached Rs 1935 crore up 93% yoy end June 2023

The bank has issued 2.51 lakh cards with the outstanding exposure of 955 crore end June 2023.

The core deposits of the bank have increased by 9%. The NRI deposit stood at Rs 28382 crore accounting for 30% of the total deposits The NRI remittance business of the bank has increased by 8%.

The fresh slippages student Rs 468 crore of which Rs 52 crore came from agriculture, Rs 266 crore from business loans, Rs 96 crore from personal segment and Rs 53 crore from corporate.

The restricted loan book of the bank declined to Rs 1297 crore end June 2023 from Rs 2198 crore end June 2022, of which business segment accounted for Rs 748 crore, personal Rs 225 crore, corporate Rs 297 crore and Agriculture Rs 27 crore. The provisions on the restructured loan book stands at Rs 493 crore end June 2023.

The provisions were higher in Q1FY2024 on account of maintaining higher provision coverage ratio and 100% provisions in the credit card book.

The bank expects to maintain the strong growth momentum in the disbursements going forward.

The bank is targeting for improvement in net interest margin to 3.5% for FY2024. Recoveries of some accounts and interesting income recognition in expected to contribute to margin improvement.

Bank also aims to improve return on asset to 1% by March 2024.

The provisions for credit card book were Rs 38 crore in Q1FY2024.

The bank expects fresh slippage ratio at 1.8-1.9% and keep fresh slippages below Rs 1500 crore in FY2024. The fresh slippages were elevated in Q1FY2024, while the bank expects the slippages to moderate going forward.

The bank aims to reduce gross NPA ratio to 4.5% and the net NPA ratio to 1% by March 2024.

The bank has sent two names for the position of MD to the RBI for approval which is expected to be received by mid August 2023.

The bank is targeting loan of 13% for FY2024 at 2 times of GDP growth.

The provision coverage ratio excluding write off stands at 65% and the bank aims to raise it to 75% by March 2024.

The bank expects credit cost at 1 to 1.1% for FY2024.

The bank is targeting recoveries and upgradations of Rs 1800 crore for FY 2024.

The bank is targeting net profit of Rs 1000 crore for FY2024.