South Indian Bank tries various approach to return to profitability

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South Indian Bank is trying to develop short- and medium-term growth strategies to remain competitive in the new and changing business environment. South Indian Bank is a Thrissur -based bank. The Managing Director and CEO Murali Ramakrishnan brings with him a lot of exposure to retail banking and has identified many focus areas which include beefing up of capital to strengthen the balance sheet, strengthening NRI relationships, drive on building strong and low-cost CASA book, and bringing out the talent of young resources.

According to the strategy of South Indian Bank, the corporate portfolio was sensibly de-grown and it is presently at 25 % of the total advance’s portfolio. The bank’s stressed accounts in the large corporate book which were identified, have been sold off to ARC barring a few, or have either turned into NPAs which are closely monitored.

The South Indian Bank will focus to continue to grow the SME, Retail, MSME, and agriculture with a Separate corporate focus. The bank expects the need for provisioning to be lesser as the risk will be diversified. The bank believes that diversification of advanced portfolio and business focus will ensure minimal stress on the account and contribute to sustained investor confidence and income.

The SIB’s operating profit has grown from Rs 525 crore to Rs 1645 crore in the last 10 years with a CAGR of 12%. The bank believes that a focused approach on increasing the growth in high yielding advanced product and increasing the CASA will improve the net interest margin to the desired level. By strengthening the core fee income by improving the income from the bancassurance tie-ups, through advanced technology initiatives and other third-party businesses will further improve the profitability of the bank.

Due to the current COVID -19 pandemic, the bank expects credit cost to be on the higher for 2 years, including the current financial year. It might pull back the profit for the current financial year, but the same is expected to get compensated with higher net interest income and non-interest income in the coming year.

The South Indian Bank has initiated a focused approach to identify opportunities for income generation and cost reduction. On account of all of the above, return on assets is expected to grow at an increased pace and achieve the desired level of 1% by FY2024.

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