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South Indian Bank seeing traction in large corporates, retail; expects slippages to remain elevated

earnings | Oct 22, 2021 12:45 PM IST

South Indian Bank seeing traction in large corporates, retail; expects slippages to remain elevated


South Indian Bank posted weak Q2 earnings. The bank reported a net loss of Rs 187 crore. In an interview with CNBC-TV18, Murali Ramakrishnan, MD & CEO, shared his take on the bank's performance and outlook. He said additional losses led to a higher loss in the quarter under review. On the positive side, he is seeing higher traction in retail, large corporates; SMEs have also started showing promise since September.

Private sector South Indian Bank (SIB) on Thursday reported a net loss of Rs 187 crore for the September quarter, hit by higher bad loans. The Kerala-based lender had posted a net profit of Rs 65.10 crore in the same period a year ago. Sequentially, there was a net profit of Rs 10.31 crore in the first quarter ended June of this fiscal. Total income during the July-September quarter of 2021-22 also dropped to Rs 1,746.03 crore from Rs 2,115.71 crore in the same period of the previous fiscal, South Indian Bank said in a regulatory filing. Interest income too was lower at Rs 1,646.59 crore during the quarter from Rs 1,898.84 crore in the year-ago period. On the asset quality front, the gross non-performing assets (NPAs or bad loans) stood at 6.65 percent of the gross advances at the end of the quarter, as against 4.87 percent by September-end 2020. In an interview with CNBC-TV18, Murali Ramakrishnan, MD and CEO of the bank, shed light on the recent Q2 performance and outlook.

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He said, “The loss is primarily due to additional provisioning of Rs 160 crore, which we have taken on a conservative basis in order to beef up our provision coverage ratio (PCR), or else our loss would have been very low at about Rs 27 crore.”
He added, “We are going through one of the most unprecedented times, market is clearly having a lot of headwinds and we are seeing the impact of COVID, particularly in the retail and SME sector. We are actually seeing good traction happening in large corporates and all our incremental addition is happening with a good quality portfolio. We saw very good traction happening in retail starting from the month of September and SME has also started showing uptick from the last month itself.”
“So by and large, I feel that all the areas which we have taken on for our growth, we are seeing substantial progress happening whether it is CASA, whether it is capital adequacy or PCR or net NPA,” Ramakrishnan said.
On advances, he said, “I am really not unduly worried about the degrowth in advances book, it was a conscious effort. If look at the September advances book in comparison with the June ended advances book, we have almost reached similar level and we are just down by some 10 crore which is actually nothing. With the traction which you are seeing in September, it is expected to go up. Again, I would want to clearly say that it is not growth for the sake of growth, we would want to grow the book with good quality so that we don't again have the problem of quality hitting the bank.”
On slippages, Ramakrishnan said, “With the collection team now in place, with recovery now being in full force, we expect things to become better as we go along. But slippages are expected to happen because COVID has completely changed the business model. So, we expect the slippage to be in line with what we have articulated.”
On NIMs, he said, “On the asset side, our NIMs are more or less holding, despite the market rates being very low and pre-emptive pricing is happening both in retail as well as in SME. Our NIMs have gone down only because of the treasury in the past quarter. Actually, we sort of look for the opportunity to make some gains on our exchange portfolio. Because of that, we saw good income arising out of treasury gains, obviously that opportunity was not there in Q2, therefore, there is a dip in terms of NIMs from the treasury. But if you look at the asset side, advances side, it is more or less holding.”
For full management commentary, watch the video.
-With PTI inputs
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