SIB’s ‘retail’ strategy yet to bear fruit

Q4 profit falls 38 pc y-o-y to Rs70.5 cr; no let-up in NPA

KOCHI: The new strategies tried out by the South Indian Bank (SIB) management focusing more on retail, after being battered by corporate bad loans, don’t seem to have started working great for the bank yet.

SIB’s net profit declined to Rs70.51 crore for the fourth quarter of 2018-19 – representing a fall of 15.90 per cent sequentially and 38.20 per cent year-on- year. The full year net profit of Rs247.53 crore recorded by the bank has also shrunk 26.09 per cent compared with that of last year.

And at the same time, despite increased provisioning, the bad loans continue to stay put sans any sign of bottoming out soon.

The strategy the bank embraced of late, to go full throttle on retail banking, has in fact, failed to come to the rescue of the bank this time too, maybe thanks to the competition posed by other banks in the same limited retail space after their bitter experience from corporate portfolio.

Though SIB managed to improve the retail revenue during the fourth quarter, sequentially as well as year on year, the bank has failed to translate it into profit.

While SIB’s Q4 retail revenue was to the tune of Rs713.30 crore compared with Rs643 crore the bank recorded for the third quarter and Rs561.26 crore for the same quarter a year ago, the profit (before provision) was Rs39.16 crore, Rs61.93 crore and Rs39.81 crore respectively.

The corporate portfolio as expected continued to report losses through all these quarters with Q4 witnessing a loss (before provision) of Rs39.16 crore compared with Rs61.93 crore loss for the preceding quarter.

While the full year profit from retail operations (before provisions) fell to Rs347.92 crore from Rs463.57 crore a year ago, the loss from the corporate book surged from Rs40.83 crore to Rs126.64 crore, adding insult to injury.

It’s not the lack of business growth that has failed the bank but rather the overhang of bad loans that has been pounding the bank from all sides for some time now.

After having logged an increase in operating profit to Rs327.55 crore for Q4 compared with Rs310.88 crore a year ago, the bank fell at the last hurdle after large provisions to the tune of Rs219.15 crore ate into the profit.

Unfortunately, having played spoilsport for all these past quarters, the non-performing assets (NPA) has refused to recede, but instead swelled further.

As the financial year drew to a close, the gross NPA soared from Rs1980.30 crore to Rs3131.67 crore during the year- an increase of 58.14 per cent with the gross NPA ratio growing from 3.59 per cent to 4.92 per cent.

During the financial year under review, the net NPA ratio also moved up from 2.60 per cent to 3.45 per cent.


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