FY 19 Q1 SIB_June_18_Financial_Result.pdf (1000.6 KB)
Higher provision dragged the profit down and the NPA shot up … I guess this year also the Total provision would be around 850 - 900 crores
Good set of numbers by south indian bank…stock was hammered badly by the markets due to the last quarter
Does SIB have any exposure to DHFL ? Is there a way to find out ?
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South Indian Bank Q4 profit falls 38% to Rs 71 crore
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1)Is there any way to find out SIBs exposure to DHFL,Coffee day group or IL&FS.
2)Mohnis pabrai , yusuf ali, Lavender investment and many others have bought stake in this bank in past so at that time they must done some calculations and based on that they invested such a huge money.
So now what was changed ?
At Rs.10 isnt it good oppurtunity?
3)What are the major negatives with this bank other than NPA.?
DISC.:- not invested
Yes,
NPA is an inherent issue with this Bank.
Not so high that it fails, not so low that we call it a Quality bank.
Was offering Good value at 0.2 times the book value. Is not worth above 0.5 times of the book.
Being Kerala focused bank should have lower impact of Covid.
Disc.: Invested at lower level.
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SIB price is mostly much below book value and it was always cheapest among peers. Considering the 20-Q4 result nothing improved from previous one. But just in one month its rallied over 80%, any fundamental change or because of its so cheap?
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My views on South Indian Bank based on Q4 FY20 Results
Positives
- Cheap valuation: M-Cap of Rs 1600 Cr
- Book value Rs 30.25
- Network of 929 branches
- Total business size - Rs 148558 Cr (Rs 65524 Cr loan book; Rs 83034 Cr deposits) bigger than City Union Bank (Rs 75000 Cr), DCB (Rs 52000), Karur Vysya Bank (Rs 107500 Cr), etc. The bank has a good base to work on.
- Bank funded by lower cost term deposits - Rs 59940 Cr out of total deposit base of Rs 83034, with NRI deposits accounting for Rs 23710 Cr
- Shift from corporate / wholesale book to retail, MSME and agri loan book
- Loan book - Retail Rs 21173 Cr; Corporate / Wholesale Rs 18659; MSME Agri Rs 25692 Cr
- Retail book - Gold (standalone) Rs 2757 Cr / Gold loan + Agri gold loan book Rs 7816 Cr - 26% growth in FY20; Housing loan Rs 5352 Cr; Mortgage Rs 5250 Cr; Business Loan Rs 3355 Cr; Vehicle Loan Rs 1086
- Improving performance metrics
- Cost to Income Ratio - Down from 55.4% in Q4 FY19 to 51.1 in Q4 FY20
- CRAR up from 12.6% in FY19 to 13.4% in FY20, incl Tier-1 from 12% in FY19 to 12.8% in FY20
- Provision coverage ratio up from 42.5% in Q4 FY19 to 54.2% in Q4 FY20
- Growing retail loan book & gold loan; de-growth in corporate / wholesale loan book
Negatives
- Geographic Concentration risk - 43% of loan book is from Kerala
- High NPA levels & high levels of stressed assets
- NIM’s dropping - Down from 2.95% in Q2 FY18 to 2.67 in Q4 FY20, though NIM’s have improved from 2.46% in Q4 FY19 to 2.67% in Q4 FY20
- Return on Assets is very low
- Moratorium at 36% of loan book at Rs 23862 Cr
- High Q4 FY20 provision at Rs 392 Cr even after deducting Rs 76.45 Cr COVID provision & Rs 255 crore market-to-market depreciation on security receipts
- More stress & slippages should be expected over the short to medium term as NPAs are expected to rise owing to COVID as well as consistently growing slippages from legacy corporate / wholesale loan book (when the bank went overboard with corporate advances between 2010 to 2014)
- Poor legacy underwriting skills, recoveries and value of recovered assets very low in comparison to provisions
- Dependence on treasury income as a key revenue / profit driver. Without treasury income, profits will be much lower
- CEO succession - This can potentially result in accelerated clean up of the book, more write-offs in the short term and losses
- Access to survival capital - Ability of the bank to survive significant slippages & asset stress due to COVID & legacy corporate / wholesale advances
At Rs 1500 Cr market capitalisation, with a 929 branch network, access to lower cost deposits, and an almost Rs 150000 Cr business and a book value of Rs 30 (The bank is currently available at 0.3x book) the valuations are cheaper. But with more stress & slippages expected in the short to medium term one can expect 50% valuations decline. The bank is potentially a good acquisition target for some of the mid-sized / large banks & NBFC’s. Besides if the bank is in a position to survive the crisis over the next 12-18 months, contain and manage the slippages, improve the performance metrics, sort the legacy wholesale banking issues, improve loan book asset quality, there is a good prospect of NIM expansion, increase in ROE which can lead to re-rating closer to a 0.75 x to 1x book value
Disc: Invested at higher levels, will look at adding at much lower levels closer to its recent Low
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In my view, FY21 and FY22 will be tough for SIB. Total business especially deposit will be down at-least by 20% due to Middle-east NRI remittance shortage.
Finally, their web portal looks decent. It was really unpolished before the recent update!
ok it might be copy paste but i think from valuation perspective this stock is not attractive. Refer to my DCB post on why i think so. Any thoughts on this approach?
Ex-ICICI Bank executive Murali Ramakrishnan likely to be named as CEO of South Indian Bank
It appears Ashish Dhawan booked loss and exited , he was holding 1.5% of SIB for a while !
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Portuguese firm Pettigo Comercio Internacional LDA bought 99,71,500 shares of South Indian Bank at Rs 9.04 per share.
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Source of this news ??
watch from 0:44
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Why did they issue these equity shares for? Here is the link to the article. This action doesn’t dilute the existing shareholder if the purchase price of the existing share holder is below the issue price of 8.48 correct?