South Indian Bank


(Ashish Pandey) #21

Hi Varadharajan, Vasim,

I had a relook at it. I also got on research paper from FLAME institute which talked about why some banks get good valuations and others pathetic. It said the main parameter to watch out for is not roe but ROA. It gave many examples. South Indian Bank was in middle of the table they created for banks. What I understood was that to drastically change roa, either management changes or approach changes or segment changes. As in SIB nothing is changing, i stopped investigating further. I guess given long term roa of 1 of SIB, it getting appropriate valuation. To change it for the better something needs to change drastically. Will try uploading that research paper.

Thanks

Ashish


(Ashish Pandey) #22

Tried uploading ut as max size allowed is 11kb and file is much bigger, couldn’t do. In case anyone interested, drop me a mail @: [email protected]


(onefoothurdle) #23

Aashish ji with due respect, please look at record of Flame institute and pabrai before you take what they say seriously. I am sure something is cooking in south indian bank we will find out in 2-3 years until then i will take pabrai’s side and buy south indian bank on every dip. when value investors buy stock its cheap and its not loved by market thats when is the time to buy.


(Ashish Pandey) #24

Hi Mukul,

I am not saying Pabrai is wrong and FLAME is correct in saying SIB wont go up drastically. I said as per FLAME’s paper, “I” think the valuation SIB is getting is unlikely to change unless management does something very different or new management comes or something else happens. FLAME is just a research institute yaar, pabrai is one of the greats in value investing. I met him last December in MDI, flew to Gurgaon just to listen to him. He himself says, for cloning, u must slice n dice the companies where value investors whom u respect have invest, i guess in this forum this is what we r doing.

I wanted to contribute to this discussion and hence put forth the ppt i came across, thats it. It was MY way of looking at things, not taking sides, hope it helps…

Also, all valuepickrs who mailed me for the ppt, many thanks for considering my contribution worthy of ur notice. I would request all of u to please share ur views in this forum to make the discussion more worthwhile.

Ashish


(onefoothurdle) #25

Sorry Aashish if it dint come out right, I fully agree with you, sometimes its hard to find out why investor like pabrai bought it, if it was so obvious may be everyone can be pabrai, one thing is clear though that downside is limited compared to other banks


(Ashish Pandey) #26

Kahe ka sorry dost?

Hi,

To all who have got the ppt from me, please do not fwd it to anyone. Person whom i received from asked me not to share it, no idea why but as he keeps on sharing knowledge generously with me so i have to abide by his wishes.

People who have mailed me and still haven’t got it, sorry can’t fwd it to u. But the synopsis of the ppt was that RoA is the key, if that changes, then and only then long term valuations change. Also, as per data SIB was in median, in terms of both, RoA as well as P/BV.


(vaibhav) #27

The stock languishing only due to technical factors. I am guessing the pros are accumulating at current levels.


(Rits) #28

SIB corrected significantly. Any suggestion from seniors.


(..pd..) #29

I would like to ask the same…


(..pd..) #30

Mohnish Pabrai is buying more. Along with J&K bank…


(Varadharajan Ragunathan) #31

pd

how does one track that -


(Ashish Kumar) #32

please check this


(Hemant V Bhatia) #33

VG Mathew, MD&CEO of the Bank addressed the call:Highlights by Capital mkt:

  • The performance of the bank was impacted by âfunded interest term loan’ (FITL) provisions for overall restructured advances book on RBI directions. Bank has assessed the FITL provisions at Rs 75 crore, which has to be provided at Rs 25 crore per quarter over three quarters ending March 2015 after RBI dispensation.During the quarter ended September 2014, bank made a FITL provision of Rs 25 crore, while similar quantum of provision has to be made over next two quarters.
  • However, bank has maintained the asset quality steady in Q2FY2015 with Net NPA ratio flat at 0.9% on sequential basis at end September 2014.Fresh slippages of advances stood at Rs 79 crore, while bank has recorded recovery and upgradations of Rs 43 crore in Q2FY2015.Fresh restructuring of advances was elevated at Rs 323 crore in Q2FY2015, mainly contributed by three accounts.
  • Outstanding standard restructured advances of the bank stood at Rs 1748 crore at end September 2014. The restructured advances in the power sector stood at Rs 871 crore at end September 2014.The restructured advances book of the bank did not witness any slippages in Q2FY2015.
  • Going forward, Bank expects to maintain asset quality steady. Bank foresees no major slippages, while recoveries and upgradation would assist asset quality.Regarding the coal block de-allocation verdict by Supreme Court, bank has exposure of Rs 400 crore to the affected companies.
  • Bank expects to improve NIM to committed level of 3% by end March 2015 with CASA improvement and better pricing power ahead.Bank is focusing on retail book to support advances growth, while looks at generating more granularity in the advances book.
  • Bank does not have any plan for capital raising in FY2015.

(Hemant V Bhatia) #34
V. G. Mathew, Managing Director & CEOadd the call.Highlights by Capital Mkt;

In the last 5 years the bank has grown its business at a CAGR of 16.63%.In Dec'14 quarter OP is up 2% to Rs 219.42 crore but NP is down 38% to 87.93 crore.The fall in PAT is due to increase in credit loss of Rs 84 crore.

The performance of the bank was impacted by âfunded interest term loan' (FITL) provisions for overall restructured advances book on RBI directions. Bank has assessed the FITL provisions at Rs 75 crore, which has to be provided at Rs 25 crore per quarter over three quarters ending March 2015 after RBI dispensation.

In Dec 14 quarter, NIM (%) stood at 3.02% against 2.72% in Dec 13 quarter and 2.80% in Sept 14 quarter.In Dec14 quarter, RoAA (%, annualised) stood at 0.71% against 1.03% in Dec13 quarter & 0.75% in Sept 14 quarter.In Dec14 quarter, Gross NPA (%) stood at 1.80% against 1.66% in Dec13 quarter &1.55% in Sept14 quarter.Net NPA (%) stood at 1.04% against 1.66% in Dec 13 quarter & 0.90% in Sept14 quarter.CASA stood at 21.51% against 21.16% in December 2013 quarter and 22.09% in September 2014 quarter.In absolute terms CASA increased 10.33% to Rs 10424 crore against Rs 9448 crore.

Current deposit increased 2.81% to Rs 1826 crore against Rs 1776 crore.Savings deposit increased 12.07% to Rs 8598 crore against Rs 7672 crore.Core deposit grew 21.08% to Rs 38888 crore y-o-y.Non-core deposit fell 23.59% to Rs 9571 crore y-o-y.Total deposit grew 8.54% to Rs 48459 crore y-o-y.It expects business to grow slightly beyond industry average of 15%. It wants to grow in home loan, auto loan and SME sector and less on corporate side.

Going forward, Bank expects to maintain asset quality steady. Bank foresees no major slippages, while recoveries and up-gradation would assist asset quality.The management feels that the bank's growth is in right direction.It has managed to systematically reduce bulk deposits from 17.01% to 11.54% y-o-y.Term deposits increased from 51.06% in December 2013 quarter to 58.72% in December 2014 quarter. .

One account slipped for restructuring from the infra sector (Rs 40 crore), one account is of a tyre manufacturing company (Rs 50 crore), one was from the steel sector (Rs 29 crore) and two small CRE accounts (of Rs 13 crore).The company provided for 11% anticipated increase in wages.

It called off equity dilution plan as the share price was low and the management thought that it was not getting its true potential. However, It has looked at other avenues like Tier II (bonds) funding as it has enough room for it.If needed it will go for tier II bond immediately and will take decision on equity dilution going forward.Restructured portfolio has been same. It has added one small account.

The bank is confident of maintaining gross NPA of 1.8% in March 2015 quarter and will hopefully improve a bit on it.Improving asset yield as bank builds fee income streams in addition to interest income.


(..pd..) #35

SIB has become a fancied stock after huge buying from Mohnish Pabrai and S Naren …


(Ashish Pandey) #36

It has fallen, down about 25% from the levels where Pabrai, bought. anyone has any updates?


(..pd..) #37

Van Eck Associates bought 67lacs shares @ 25.15

kotak fund bought 2.8cr shares @ 25.75

current holding of MA yussufali stands at 5cr. from initial 3cr. (don’t know at when and at what price he increased)

current holding of mohnish pabrai stands at 6cr. shares from initial 1.9cr. (don’t know at when and at what price he increased)

number of branches increased to 821 from 800.

highest per employee profit.

MFs has highest ever exposure to banking sector.

disc: I hold and adding more on every decline of 5%.


(Vishnu Ch) #38

Conference Call - Courtesy of Capital Market

South Indian Bank
Focusing on retail segment for future growth
South Indian Bank conducted concall to discuss financial performance for FY 2015. V. G. Mathew, Managing Director & CEO of the Bank addressed the call.

Highlights of the call:

    • South Indian Bank registered a 2% rise in Interest income to Rs 1322.43 crore in the quarter ended March 2015. A 4% rise in interest expenses to Rs 975.34 crore saw net interest income (NII) fall 5% to Rs 347.09 crore.
    • Other income grew 26% to Rs 121.94 crore, which took net total income up 2% to Rs 469.03 crore.
    • PBT fell 85% to Rs 27.24 crore. Net profit dived 87% to Rs 16.32 crore.
    • In FY 2015, South Indian Bank registered 5% rise in Interest income to Rs 5286.22 crore. An 8% rise in interest expenses to Rs 3919.99 crore saw net interest income (NII) falling 2% to Rs 4366.23 crore.
    • Other income grew 35% to Rs 497.07 crore, which took net total income up 5% to Rs 1863.30 crore.
    • PBT fell 45% to Rs 402.21 crore.
    • EO gain was Rs 43.39 crore against nil. Thus PBT after EO fell 39% to Rs 445.60 crore.
    • As tax expenses fell 38% to Rs 138.40 crore, net profit fell 39% to Rs 307.20 crore.
    • Other income increased by 35% during the year with strong contribution from treasury, forex and ATM usage fees.
    • To increase other income, the bank will focus on treasury, exchange and other services for SME, retail and NRI clients.
    • In FY 2015 Operating expenses grew 19% to Rs 1047.04 crore. Operating expenses include the impact of additional employee expenses (Rs 52 crore) on account of differential due to settlement and actuarial liabilities; amortization of actuarial liabilities has been completed.
    • Provision and contingencies jumped 166% to Rs 414.05 crore. Provisions increased on account of NPA, restructured assets and FITL. Increase in Provisions primarily driven by historical loan book issues.
    • Net shortfall of Rs 8.32 crore in sale of NPA assets to ARCs will be recognized over 2 years.
    • There was also a provision of Rs 28.09 crore on account of FITL during March 2015 quarter. Amortization of FITL provisioning has now been completed.
    • Exceptional Item refers to reversal of excess depreciation charged till March 31, 2014 (net of taxes) due to change in depreciation method from WDV to SLM.
    • The bank has used the year for consolidation, improving asset quality and significantly shifting focus to retail segment.
    • The bank has taken NPA management initiatives wherein it has formed a Special Recovery Cell headed by DGM and staffed by legal team. This has resulted in Collection efforts for large ticket NPAs which were responsible for multiple recoveries over past 6 months.
    • Housing loans is its key focus segment. In this it will focus on centralized processing and faster approvals. Total housing loan book increased from Rs 1544 crore to Rs 2106 crore. The bank has set up special retail hub in Cochin to increase focus on housing finance.
    • It is in the process of setting up two more hubs, One in South India and one in North India.
    • Other focus areas of retail segment are auto and agri. In FY 2015 all focus areas of retail segment grew well but was offset by gold business.
    • The company is consciously moving from corporate sector to retail sector.
    • Gold loan portfolio has fallen down from Rs 6275 crore to Rs 4591 crore.
    • With more contribution from retail segment the bank is confident of future growth.
    • Kerala franchise providing a strong base with growth in advances led by expansion into other geographies, both in South India (ex-Kerala) and Rest of India.
    • Its future strategy for includes strengthening long-term franchise value with focus on Retail and SME segments.
    • For Improving asset quality the bank will form a specialized cell focused on recovery from NPA accounts. It will also clean books through sale of stressed assets to Asset Reconstruction
    • Companies (ARCs)
    • Restructured assets increased from Rs 1938 crore in December 2015 to Rs 2068 crore as on march 2015.
    • Total slippage was around Rs 82 crore from the restructured book.
    • The restructuring pipeline as of now would be Rs 100-Rs 150 crore.
    • RoA stood at 0.52% in March 2015 against 0.92% in March 2014.
    • RoE stood at 8.56% in March 2015 against 15.07% in March 2014.
    • It will also look to improve its in core deposits for long term growth.
    • The management is confident that CASA will improve with concerted efforts at branch level.
    • Total Rural Infrastructure Development Fund (RIDF) on the book is Rs 2631 crore as on date.

Disc: Not Invested.


(Hemant V Bhatia) #39

V. G. Mathew, MD & CEO add the call.Highlights by Capital Mkt:
South Indian Bank registered a 2% rise in Interest income to Rs 1376.68 crore in the quarter ended June 2015. A 3% rise in interest expenses to Rs 1036.34 crore saw stagnant net interest income (NII) at Rs 340.34 crore.Other income fell 14% to Rs 103.83 crore, which took net total income down 4% to Rs 444.17 crore.Operating expenses increased 9% to Rs 263.28 crore, after which OP fell 18% to Rs 180.89 crore.Provision and contingencies fell 16% to Rs 79.51 crore, after which PBT fell 20% to Rs 101.38 crore.EO gains were nil against Rs 43.39 crore thus PBT after EO fell 40% to Rs 101.38 crore.As tax expenses fell 16% to Rs 36.09 crore, net profit dived 48% to Rs 65.29 crore.Other income was driven by strong contribution from transaction fees despite the decrease from treasury.Q1 is a slow quarter but the bank saw traction in retail segment.Gold loan declined during the quarter. But the management is hopeful of it improving going forward.It plans to increase other income by enhancing treasury income, targeting end-to-end SME business potential, strengthening retail presence, focusing on NRI remittances and currency conversion and by integrating both domestic and forex treasury.Provisions decreased mainly due to the reduction in loan loss provisions.In June 2014 quarter there was EO income of Rs 43.39 crore due to reversal of excess depreciation charged till March 31, 2014 (net of taxes) due to change in depreciation method from WDV to SLM.NIM stood at 2.93% as of June 2015 against 3.03% in June 2014 quarter and 3.03% in March 2015 quarter.Capital adequacy ratio (Basel III) stood at 11.46% as on June 2015 against 12.19% in June 2014.Capital adequacy ratio (Basel II) stood at 13.66% as on June 2015 against 12.35% in June 2014.it was 13.16% in March 2015 quarter.Gross NPA rose from Rs 517.30 crore as of June 2014 and from Rs 643.56 crore in March 2015 quarter to Rs 713.83 crore as of June 2015.In percentage terms, %GNPA rose from 1.50% as of June 2014 and from 1.71% from March 2015 quarter to 1.85% as of June 2015.Net NPA rose from Rs 310.54 crore as of June 2014 and from Rs 357.05 crore in March 2015 quarter.to Rs 463.98 crore as of June 2015.In percentage terms, %NNPA rose from 0.91% as of June 2014 and from 0.96% from March 2015 quarter to 1.21% as of June 2015.NPA rose because of one account of about Rs 60 crore due to cash flow problems faced by it. Upgradation is expected in next few days. The management is reasonably confident of recovering this.The company has been recovering Rs 200-250 crores every year and this year also the target is same.CASA stood at 20.58% as of June 2015 against 21.16% in June 2014 quarter and 21.33% in March 2015 quarter.It improved CASA by 14% through concerted efforts at the branch levelWith better products and efforts the management is confident that the CASA will continue to grow.Provision coverage (%) stood at 57.95% as of June 2015 against 55.73% in June 2014 quarter and 53.56% in March 2015 quarter.
Kerala franchise is providing a very strong base with growth in advances led by expansion into other geographies, both in South India (ex-Kerala) and Rest of India.The bank has 409 branches in Kerala. In South India (excluding Kerala) it has 213 branches.In rest of India it has 119 branches.
The bank has 475 ATMs in Kerala. In South India (excluding Kerala) it has 230 ATMs.
In rest of India it has 125 ATMs.The bank is strengthening core deposit franchise for long-term growth.
It is shifting focus from Gold Loan to Retail, SME, and Agriculture.Restructured Assets as on June 2015 stood at 2170 crore.Fresh Additions to the Restructured Assets were Rs 153 crore (against Rs 107 crore in June 2014 quarter)To reduce NPAs, the bank has formed is Special Recovery Cell headed by DGM and staffed by legal team. It is also shifting focus from large corporates to mid and small enterprises.
For housing business the bank has set up a special retail hub in Cochin to increase focus on housing finance. It will set up two more–one in South India and one in North India.The bank is targeting to become banker of choice for SMEs thereby getting other business as well –liabilities, vehicle finance, etc.Fresh Slippage / Advances ratio is extremely low across Retail, SME, and Agriculture loan book.Recent hires are positioned to grow through the ranks at SIB and increasingly into retail positions in an effort to drive growth and expansion.Many employees have been at SIB for greater than 5 years.Core business increased by 20.72% during the quarter.Business growth in Q1 is encouraging despite subdued credit offtake.Housing loan is doing very well.The company is focusing on reducing bulk deposits.Interest reversal in June 2015 quarter was Rs 25 crore.During the quarter NRE deposits grew by Rs 580 crore.NIM in FY 2016 is expected to be around 2.85-2.9%.


(Hemant V Bhatia) #40

VG Mathew MD& CEO of the bank addressed the call:Highlights by Capital Mkt
Bank has improved business growth to 13% in Q2FY2016 from 12% in the previous quarter. Bank has maintained the advances growth steady at 12% at end September 2015, despite decline in the gold loan book.The decline in Loan-to-Value (LTV) ratio and price volatility has led to the drop in gold loan book. As per the bank, the prospects for growing gold loan book has improved with the reduced price volatility.
Bank is strongly focusing on retail and SME loans segment, while proposes to further deepen relationships with retail and SME customers. Bank intends to emerge as a bank of choice in the SME segment. The bank is planning to set up more housing loan hubs to boost home loans growth.Bank has recorded loan growth of 13% in the first half of FY2016, while expects loan growth to be higher in the second half of FY2016. Bank has targeted loan growth of 30% for auto and housing segments, 20% for agriculture and SME segments and 12% for small corporate loans (Rs 25-50 crore).
Fresh slippages of advances jumped to Rs 222 crore in Q2FY2016, mainly contributed by one pharma sector account of Rs 119 crore from restructured advance book. Another small corporate account contributed slippages of Rs 37 crore, while rest of the slippages came from smaller accounts in Q2FY2016.Bank has restructured one account from road sector with the exposure of Rs 95 crore in Q2FY2016, mainly on account of change in date of commencement of commercial operation.
Outstanding restructured advance book of the bank stood at Rs 2000 crore at end September 2015. As per the bank, about 44% of the restructured advance relates to power sector, and expects these account to show turnaround with the recent measures announced by the government.Regarding the non-power sector restructured advances, bank sees no major concerns, which includes about 11 accounts with the exposure of Rs 50 crore and above each.Bank always intends to maintain GNPA ratio below 2%. However, the GNPA ratio increased above 2% mark in Q2FY2016 due to slippages of one large pharma account. Bank expects to bring GNPA ratio below 2% by end March 2016.Bank has improved the NIM to 2.81% in Q2FY2016 supported by rationalization of liabilities. Meanwhile, bank is working on further rationalization of liabilities and expects to sustain NIM at current level.Bank witnessed surge in employee expenses in Q2FY2016 mainly on account of one-off leave encashment provisions of Rs 5 crore and another Rs 5 crore of provisions related to employee wage revision. Bank expects to improve cost-to-income ratio to 56% by end March 2016 and proposes to further improve cost-to-income ratio to 50% in the medium term.Bank recorded large write-back of Rs 37.9 crore of restructured advances provision in Q2FY2016 on account of change in working of sacrifice provision for restructured advance as well as slippages of large restructured advance account to NPA category in Q2FY2016.
Regarding the emerging competition from the newly licensed banks, bank has been strongly working on improvising its net and mobile banking platform.