South Indian Bank (SIB) has announced an 87% year-on-year (y-o-y) decline in its very first quarter net profit to Rs 10.31 crore, largely due to larger credit fees. Bad loans improved, with the gross non-performing assets (NPA) as a percentage of gross advances becoming reported at 8.02% for Q1FY22, from 6.97% in the preceding quarter, and the net NPA as a percentage of gross advances at 5.05%, against 4.71% in the preceding quarter. Murali Ramakrishnan, MD & CEO, speaks to FE’s Rajesh Ravi about the efficiency of the bank and influence of the pandemic.
NPA levels are seen on the larger side. What is your outlook for the fiscal?
This is due to COVID influence on the retail and the MSME segment. Entire Q1 got washed out due to COVID and we are seeing some residual influence in Q2. Hopefully, the second half will be improved. For the complete year, we anticipate slippages to be as higher as last year. We are providing a guidance of Rs 2,500 crore for the fiscal.
You described about residual influence of the pandemic in Q2.
Business is coming back. In quantity of applications, there is a revival when compared to April-May. We also have to issue in the influence of pandemic on the future of a lot of companies. But then there are two variables to be watched. One, my NPA is higher and I do not have any area for threat taking. Second, a lot of banks are flush with funds and chance to lend is low. The prices they are providing now is unsustainable for the SME segment.
From which sector do you see development coming in for your bank?
Compared to Q1, I am seeing development in all the merchandise. Among the merchandise, corporate is displaying development in quantitative terms due to bigger offers.
What about the gold loan portfolio offered that competitors is hard?
In gold loan, a lot of banks which lend aggressively with larger LTV faced margin difficulties and NPAs went up. Auctions have been also not taking place and this lead to larger NPAs in gold loans. We are constantly developing the portfolio, but did not pursue it aggressively. Our LTV is about 70-71% level and so we did not have the challenge of margin finding eroded due to fluctuation. Our delinquency in the gold loan portfolio is only .03%. It is a clean book. The only trouble is that there is continuous poaching taking place in the segment. We are also tweaking our prices and we are seeing some stagnation. It is a desirable solution and we anticipate a 15-16% development year-on-year.
What is your outlook on NIM?
We are consciously enhancing the sourcing expense of fund. My operating profit has not gone down in spite of my total asset book de-developing. NIM will endure due to the low predatory pricing in the marketplace. It will be camouflaged in the major banks due to the total size of their asset books. For SIB, NIM will be beneath stress due to the low marketplace prices.
Your total small business de-grew in Q1.What is your guidance for the complete fiscal?
I am in fact performing a basic correction in terms of constructing a high-quality book. My addition might not compensate for the degrowth in my book. Continuing this more than a period will alter the complexion of my book. Total small business was reduced in Q1 and Q2 is improved than Q1. H2 will undoubtedly be improved than H1 and we will attempt and go back to the last year’s level by March.
SIB has been speaking about 6Cs approach for Vision 2024. Are you pleased with the progress?
We are seeing quite fantastic progress taking place in every single parameter of 6C. We have raised capital and CASA ratio has crossed 30% for the very first time. Cost to earnings has enhanced. Compliance is a continuing affairs and competency constructing has also made progress. We have also invested in a treasury platform and vendor dealer financing platform with a reputed dealer.
Collaboration with fintechs and any new merchandise?
We have tied-up with a fintech for credit card issuance and will launch it shortly.