SIB suffers big blow from IL&FS exposure

Infrastructure conglomerate contributes Rs400 cr to SIB’s gross NPA

THRISSUR: Kerala’s second largest lender, South Indian Bank (SIB), suffered big from bad loans during the third quarter.

SIB, which has not been habitually into ‘big ticket’ lending, had to include a new addition of Rs400 crore as NPA on behalf of the embattled IL&FS during the third quarter ending December 31, 2018, thus taking the gross NPA tally up to Rs2930 crore .

This also points to a disheartening fact that SIB’s gross NPA surged by Rs1155 crore or by two-thirds during the past one year alone. Out of the total slippage of Rs659 crore during the quarter under review, Rs503 crore has been contributed by the corporate portfolio, and within that, Rs400 crore by IL&FS alone, whereas another Rs103 crore has come from one EPC contractor company, according to statistics provided by the bank.

During the same period, the cost-to-income ratio (C/I ratio), the efficiency barometer of the bank, has worsened or increased by about 1000 basis points or to be precise, by 9.56 percentage points – from 45.12 per cent to 54.68 per cent though, in between, it had gone as high as 57.88 per cent in June.

On the high cost-to-income ratio this time around, a spokesperson of the bank explained that the ratio was higher on account of the lower other income during the current year as the treasury income was much less than the last year.

“As it is obvious, the market was not congenial for generating treasury profit during the year. In fact, the operating cost had witnessed only a normal increase of 10 per cent as expected,” he added.

Some market observers view the rising NPA certainly as a cause for worry. The gross NPA on percentage basis increased from 3.40 per cent to 4.88 per cent year-on-year, whereas the net NPA went up by 120 basis points to 3.54 per cent during the period under review.

Seemingly as a measure to bolster the bottom-line, the bank has embraced the gold loan during the third quarter. While the total gold loan portfolio grew by Rs512 crore during the past one year to Rs1840 crore, a big chunk of the growth, Rs346crore has come during the third quarter alone – September-December period.

The bank had some time back announced that its new business policy would be to focus more on retail lending and thus become a retail powerhouse.

The bank that witnessed a drop in its third quarter net profit year on year from Rs115 crore to Rs83.85 crore fared poorly on corporate portfolio, which handed out a loss of Rs61.93 crore whereas the retail business raked in a handsome Rs109.48 crore during the quarter ending December 31, 2018.

The bank also succeeded in expanding the retail portfolio to Rs16,857 crore – up by 29.4 per cent during the past year.

 

 

 

 

 

 

 

 

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