Board approves issue of Rs500 cr Tier 1 bonds
KOCHI: Despite generating decent interest income and operating profit of Rs1917 crore and Rs383.14 crore respectively for the third quarter (Q3) ending December 31, 2019, the Thrissur-headquartered South Indian Bank (SIB) may have failed to finish the race comfortably this time too as the bank has been required to set aside substantial amounts as provisions against its insidious non-performing assets (NPA).
With the provisions against NPAs (other than tax) soaring from Rs203 crore to Rs261 crore during the quarter under review– increasing by almost 30 per cent year on year, the net profit for the period closed at Rs90.54 crore against Rs83.85 crore a year ago, an increase of only 8 per cent.
The total assets of the bank during the year improved by 9 per cent from Rs88,249 crore to Rs96,534 crore. Total advances during this period increased from Rs60,064 crore to Rs65,334 crore.
The SIB board at its meeting approved the issuance of unsecured, perpetual, non-convertible, Basel-3-compliant, Tier I bonds not exceeding Rs500 crore, in one or more tranches.
This will help the bank improve its Tier 1 capital ratio and the capital adequacy ratio (CAR) from the present 9.6 per cent and 12.02 per cent respectively.
The overhang of the obdurate non-performing loans (NPAs) may continue for a few more quarters giving stress to the bottom line, according to analysts.
“This is the reason why the bank’s share with a book value (as of December end) of more than Rs30 is still trading just above one-third of its BV even as its less efficient peers are performing much smarter on the stock markets,” they pointed out.
While the gross NPA increased from Rs2930 crore to Rs3243.69 crore year on year (from 4.88 per cent to 4.96 per cent), the net NPA inched up from Rs2099.67 crore to Rs2211.88 crore though falling in percentage terms marginally from 3.54 per cent to 3.44 per cent as of December 31, 2019.
The bank has been able to bring down the corporate portfolio size to that of retail at about 30 per cent of the total advances. VG Mathew (seen in the picture), the MD and CEO of the bank said the bank’s balance sheet has been further strengthened by way of reduction in the corporate exposure and growth in the retail, agri and MSME portfolios.
“The retail portfolio has grown at 17.66% Y-o-Y and is already accounting for 30 per cent of the loan book, taking the bank closer to its stated objective of becoming a retail banking powerhouse,” Mathew added.
But unfortunately, this time around, both treasury and corporate portfolios contributed loss with the retail alone left to anchor the bank at profitability.
Though SIB has been working at diversifying the loan portfolio geographically away from Kerala, it seems the credit disbursals within Kerala have been on the rise in proportion to the rest of Kerala.
While the advances within Kerala a year ago were valued at Rs24,208 crore against the total advances of Rs60,064 crore, this has grown to Rs27,359 crore against the total advances of Rs65,334 crore. This works out an increase in Kerala loans from 40.30 per cent to 41.87 per cent of the total advance during the said one-year period.