By CL Jose
Federal+SIB+CSB+Dhanlaxmi together valued less than half Muthoot
KOCHI/February 13-2022: It’s not for nothing the Kerala-based banks are now frantically working on building their gold loan portfolio like never before.
The growth the gold loan companies, particularly the Kerala-headquartered Muthoot Finance and Manappuram Finance, have achieved right before the eyes of these banks that boast much longer and illustrious past, is spectacular enough to turn these banks green with envy.
The profit Muthoot Finance has reported for the third quarter (Q3) in the current year at Rs1044 crore itself is testimony to how the company’s bottom line has been growing. Muthoot reported a consolidated 9-month profit of Rs3025.1 crore this time.
Today, Muthoot Finance is more than twice larger than all the four listed banks from Kerala put together, in terms of market value or market capitalisation.
To put it straight – the combined market valuation of all these four banks – Federal Bank, South Indian Bank (SIB), CSB Bank and Dhanlaxmi Bank, is less than half that of Muthoot Finance.
Barring Federal Bank, the combined market value of SIB, CSB and Dhanlaxmi is again less than half that of Manappuram Finance, which has a market cap of Rs129.5 billion as of Feb 11, 2022. Manappuram has always played the second fiddle to Muthoot in terms of business volume and profitability.
Funding from banks
Ironically, a big chunk of the funds used by these gold loan companies for their growth have been sourced from these banks (not the 4 banks per se).
Out of the total stable sources of funding at Rs47,122.8 crore, sitting on the ‘right’ side of Muthoot Finance balance sheet as on December 31, 2021, almost 52 per cent- at Rs24,615.8 crore has been routed from banks and financial institutions (FIs).
Another interesting fact is that the loan book of the nonagenarian South Indian Bank (SIB) as of December end, 2021, at Rs59,226 crore, now stands dwarfed by that of Muthoot Finance at Rs61,696 crore.
While the market cap of Muthoot Finance (share closing at Rs1418 on Feb 11,2022) was at Rs572 billion as of Feb 11, that of Federal Bank was Rs216.6 billion, CSB Bank (Rs42.2 billion), SIB (Rs18.1 billion) and Dhanlaxmi Bank (Rs3.74 billion).
Of late, gold loan has gained a special thrust in banks’ board meetings. CSB Bank has gone to the extent of ‘dangling the bait’ of wage increment before a section of disgruntled staff, in order to boost their gold loan portfolio, though the target set is viewed as a ‘far cry’.
