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Informist, Thursday, Oct. 17, 2024

 

--South Indian Bank MD: To grow deposits by 8-10%, credit 10-12%

--CONTEXT: Remarks by South Indian Bank MD, CEO PR Seshadri in an interaction

--South Indian Bank MD: Garnering deposits not a constraint yet

--South Indian Bk: Want to shift loan focus from corporates to retail, MSMEs

--South Indian Bank MD: Slower growth in MSME loans an area of concern

--South Indian Bank MD: Want NIM at 3.5% in medium term, 4.0% in long term

--South Indian Bk: Working on priority to restart co-branded credit card ops

 

By Kshipra Petkar and Pratiksha

 

MUMBAI/NEW DELHI - South Indian Bank Ltd. aims to grow its deposits by 8-10% while targeting a slightly higher loan growth of 10-12%, said P.R. Seshadri, managing director and chief executive officer of the bank. "We will check that we grow deposits between 8-10% and assets between 10-12%. We have gone a little ahead of them right now," Seshadri said in a telephonic interaction with Informist on Thursday.

 

"Within our assets, we will be working out of corporate and getting more into retail and MSME. That is the strategy," Seshadri added. The Kerala-based lender announced its quarterly results on Wednesday, with net profit in Jul-Sept rising 18% on year to INR 3.25 billion. As at the end of the quarter, the bank's deposits were up 8.6%, while loan growth stood at 13.0%.

 

In recent months, several bankers as well as the Reserve Bank of India have sounded a warning on deposit growth being lower than credit growth, with the central bank even calling on lenders to mobilise retail deposits. As per the latest RBI data, banks' loans were up 12.8% on year as on Oct. 4, while deposits grew at a slightly slower pace of 11.8%. However, Seshadri said that raising deposits is not yet a business constraint for South Indian Bank, adding that if credit grows faster than deposits by a wide margin, the bank will have to offer rates closer to the market to boost deposit growth.  

 

In terms of advances, South Indian Bank wants to shift its focus from corporates to retail and micro, small, and medium enterprises, which are slightly higher yielding in terms of returns. "We are slowly moving our balance sheet away from corporate, more into retail and MSME. MSME hasn't really moved very much for us. So that is an area of concern, and we are working on it to get that to go up," Seshadri said.

 

As on Sept. 30, South Indian Bank's housing loans rose at the fastest pace, posting a year-on-year increase of 41.9%, albeit on a low base of INR 70.72 billion. Corporate advances grew 23.5%, while personal loans were up 9.0%. As much as 40% of the lender's loan book is made up of corporate loans.

 

While Seshadri did not provide a guidance on the bank's net interest margin for the current financial year, he said the aim is to move it to 3.5% in the near term and 4.0% longer term "by changing our asset mix, but not during this financial year". The bank's net interest margin in Jul-Sept was 3.24%, broadly unchanged from 3.26% in Apr-Jun, but slightly lower than 3.31% in Jul-Sept 2023.

 

The bank's retail push is expected to be aided by a re-entry into the co-branded credit card space after it stopped issuing new ones in March following the RBI's decision to revise certain guidelines. The revised norms said card issuers must have a system to monitor the end-use of funds spent through business credit cards.

 

"We believe that we've done all the work required to go back to RBI," Seshadri said. "...the work has been done, reviewed, and audited so that we can then make a formal request to RBI once our board approves. We are working on it as matter of urgency."

South Indian Bank's credit card outstanding makes up 7% of its personal loan segment and was at INR 15.93 billion as on Sept. 30, up 37% on year.

 

Commenting on the impact of the RBI's proposed project finance norms, Seshadri said the bank's balance-sheet is not exposed much to project finance. "Our CRAR (capital adequacy ratio) is running at more than 18%. So, we are not a capital-constrained institution in that sense...But having said that, we are trying to understand the policy when it comes out. If there are any modifications to the stated policy or the draft policy that came out earlier, then we will have some stance," he said.  

 

Thursday, shares of South Indian Bank closed at INR 25.19 on the National Stock Exchange, down 1.3% from the previous close.

End

 

Edited by Vandana Hingorani

 

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