Kerala-based South Indian Bank announces 6Cs strategy for Vision 2024

South Indian Bank has announced its Vision 2024, which will focus on 6Cs including capital, CASA, cost-to-income, competency building, customer focus, and  compliance. Capital remains one of the most important pillars of this strategy and SIB aims to shore-up its capital base over the near term. The bBank is planning to raise around Rs 750 crore during the current and the next fiscal to support growth. 

Murali Ramakrishnan, who recently took over as the new managing director and CEO, said that by 2023-24, the bank aims to reach a loan book of Rs 1 trillion (from Rs 65500 cr currently), CASA mix of 35%, PCR of over 65% (~38% currently excluding write-offs), NIM of 3.5%, and RoA/RoE of over 1%/13%.

The bank has received an approval to raise around Rs 750 crore capital, of which the bank plans to raise around Rs 250-300 crore by end of the current fiscal . The balance will be raised during the next fiscal. The bank might go for a rights issue or rope in some institutional investors or explore both the options, he said.

The bank aims to leverage its Kerala franchise and further strengthen its NRI deposit base. It is looking to re-organise its team structure, with a new vertical focusing on Kerala and other parts of the country.

The bank is also looking to partner with exchange houses, banks, and remittance platforms to expand into geographies from where it can tap the NRI business. ‘Fair to customer – Fair to bank’ is the philosophy that the management is going to follow as it looks to diversify its product offerings. Assets and liabilities teams would work closely for creating value for existing customers, said the management.

While current growth trends remain muted due to the Covid-19 pandemic, the bank is optimistic of a revival in growth from Q1FY22 onwards. Personal loans will likely grow at a faster rate, doubling in 2-3 years, aided by a benign base.

The bank is planning to revamp its existing retail product suites of HL, LAP, PL, credit card, while launching few other retail products like LAS, SBL, IPO funding, dealer funding, tractor funding, etc. This would help improve fee income. The bank is targeting a fee income-to-asset ratio of 0.5-0.6%.

"All the products will see moderate and reasonable growth," said Ramakrishnan, who is planning to strengthen the retail team by recruiting people with the industry.

Speaking about NPAs,  Ramakrishnan said, currently GNPA is at around 4.9 per cet and net NPA is at 3 per cent. He expects the numbers to go up before they moderate by next year,

According to Motilal Oswal, SIB has been delivering muted performance, with higher provisions and opex impacting earnings, while its margin profile remains modest. Business growth remains tepid, impacted by a challenging environment. The focus has been on improving the granularity of the loan book and the bank has been consciously increasing the mix of Retail, Agri, and MSME loans. Asset quality trends have been stable, supported by the SC’s dispensation however, we remain watchful of slippages/restructuring in coming quarters. We estimate credit costs to stay elevated and project RoA/RoE of 0.3%/6.3% by FY22E.