Current book value is around 30 rupees.
Expecting ROEs of 12-13% next year so.book value can be anywhere between 33-34 rupees for FY 24.
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Screener still shows 28
@Worldlywiseinvestors
Thankyou for explaining this sir.
I had one doubt how do we calculate the ageing related provisioning for SR. I mean if the NET SR for a bank is 100cr then how do we come to know how much of provisioning is required for that NET SR if there are no recovery.
I mean how did you come up with the 48cr and 15cr numbers. If you could please further elaborate this.
one more question I had here is suppose you transfer 100cr of asset to ARC which has a net book value of 20cr and against this you get a consideration of 20cr. So in this case you only get to record recovery till 20cr and anything recovered above 20cr goes to ARC is my understanding right here. Please correct me if not.
Thankyou
Numbers are given in the concall which explains the remaining provisioning that is left on Srâs
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Ideally, book value will be higher than 34, if ROEâs are 13 odd percent in FYâ24.
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Letâs hope for the investorâs sake the CEO sticks around for a while because it seems like so much is riding on his shoulders.
and interestingly , as it appears all of them exited / significantly reduced the stake ! Pls note, when it comes to investing , Donât follow the crowd, let the crowd follow you 
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Exercise price of 16.5 means that the CEO can convert his options into stocks by buying @16.5 even if the stock price goes much higher from here. Basically it means that the management seems bullish that the stock will go much higher from here and hence gave the CEO an options price of 16.5 which is closer to current market price.
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You are a customer of a small regional bank in India. You are somewhat aware of what is going on in the US.
You donât understand asset-liability mismatch, QE, and other intricacies of banking. All you gather from regular news (and WhatsApp?) is that small banks in the US are stressed, and deposits are at risk. People are moving their money to the bigger banks.
Would that not make you uneasy? Would you not move your deposit to bigger Indian banks?
This hit me while watching todayâs interview of CEO South Indian Bank. At 5-30 in the video he talks about the slowdown in CASA. Sure the reasons are different. He perhaps meant CASA is decreasing due to the high-interest rate situation, where people move money to other products.
But the question remains. Why would it not cause a (mild) impact on smaller banks in India? At least till the dust settles down in the US, which isnât happening anytime soon.
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But the point remains same, isnât it too cheap to trade at 0.5 PB
Thatâs the main thesis that with good leadership we should see PB 1/1.2
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Their CASA growth had slowed before the US banking crisis.
I think the most important reason their CASA growth is slowing down is because they literally havenât expanded branches since 2 years. Their # branches in FY21 Q1 was 924 and now I think its 928. How do you grow CASA at a good clip if you donât expand branches? You may be able to onboard customers online or via corporate salary accounts, but if they need physical servicing at branches and the nearest one is 10 KMs away, it most likely wonât work.
On a separate note, the new MD is much more focused on quality of book rather than growth. And I like that. For a bank like SIB which had lost trust in its underwriting capabilities, prudent underwriting rather than growth is going to trigger faster re-rating IMO. Even if re-rating isnât fast, re-rating is much more certain in this approach compared to a growth first approach.
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My entire bet on SIB is on the jockey and his conservative approach to lending. This all is coupled with the npa cycle which has recently bottomed out. Market perception is still not rewarding the shareholders here which is why this bet might give asymmetrical pay off in the medium term. The current pause is cause of sudden rise of interest rates which affect lending as well nims. I am expecting this to cool off given fed might pivot soon and due to recent commodity sell off the inflation might be tamed for good. Given the old book is still sizeabloe and affects the performance of the bank. I am wishing for a scenario where the old lending book drag reduces, new lending book and growth propels the bottom line and the jockey keeps the npa under control. This might sooner or later lead to sizeable rerating.
disc: holding and added recently
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Itâs a very risky bet and its almost operating like a PSU. Depends on credit cycle it will again go in to truble. I am planning to exit once its cross 20
Disc: holding since 2020 April
Hello
- Jaysags , what do you mean by PUC. Could not place the comparison correctly. Can u please elaborate with a eg or data.
- As per me the npa cycle peak or worsening is reaosnably far away. For this to happen there has to be some sort of reckless or casual lending and this has to couple with some sort of heating post expansionary cycle.
Attaching a recent article where RBI mentioned about the rate cycle:
3. I am trying to Fit in SIB in this credit cycle where the chances of getting ugly are low (getting better are more) along with a conservative jockey.
Looks like tailwinds are favorable as of now
countervoews are welcome
Best
Divyansh
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Hi Divyansh, Personally I am little sceptical about lending business as its cost of capital is tool high and things can change all of a sudden. SIB is cheap for a reason. The bank is highly dependent on NRI remittance mainly from middle east. currently it is in declining mode. Now the bank is more focusing on retail loans which will help the bank to control the NPA short term but the margins will be significantly affected in longer term.
I entered in this bank when it was very cheap( mine average : Rs.5.5 ), considered as low risk. now my target is almost achieved. planning to exit.
I donât see any fundamental change in the bank expect, the general narrative that the indian banks are in better position than US and European ones. I think mainly its based on NPA cycle. it can change any time (not more than 2 to 3 years)
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Attached please find the latest INV ppt for the SIB
- Points which stand out for me is the reduction in provisions , increase in nim to 3.62 , healthy new loan book with nil defaults till date from oct 20.
- As pointed by you doesnt look the remittance business is not delivering, it grew at a healthy pace of 14%.
- Corporate loan book grew by 18 % and NII by 44%.
- All this has been improving steadily and can be compared qoq and yoy as well.
- i will be willing to reconsider by thesis here only if the data changes for bad but as of now things are on track.
- it appears your investment decision is anchored to your entry price and the gains which you do not want to give back to the market. However these are subjective things and change from investor to investor.
plz do go through the inv ppt for more details. if the jockey here was mr sobti or rana kapoor from yes bank , then i would have been little wary as these guys have a agressive approach as compared to the conservative approach of SIB.
Best
divyansh
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