South Indian Bank - Unveils vision 2024; targets RoA / RoE of 1% / 13% by 2024 - ICICI Securities

South Indian Bank (SIB), in its business update call, unveiled its medium-term strategy by focusing on 6Cs - a) capital beefing, b) focused drive on building CASA deposits, c) using technology & initiating cost rationalisation drive to reduce cost/income ratio, d) revamp organisation structure to build capabilities, e) focus on customer service and leveraging existing customer base, and f) adherence to highest integrity standards. Further, it highlighted that it is in the process of revamping the business structure to sharpen focus on retail asset growth, accelerate CASA mobilisation and improve cross-sell / upsell. Overall, it expects credit growth to remain between 10-15% in FY22e & >20% in FY23e driven by retail loans while corporate portfolio will continue to decline until March'23. It expects RoA / RoE to touch 1% / 13%, respectively, by 2024 driven by margin expansion, cost rationalisation and lower delinquencies from incremental credit originations.

- Focusing on risk-based pricing to improve asset yields. Management highlighted going forward, loan pricing of all lending products will be based on asset risk profile, and the same may improve blended asset yields for SIB. It further articulated its strategy to focus on high-yielding (~10%+) retail loans like gold loans, unsecured PL, business loans, LAP, SBL, credit card etc. It also intends to start launching new retail products Q1FY22e onwards.

- Targets CASA ratio at 35%+; NIM to settle at 3.5%+ by 2024. It plans to improve CASA ratio to 35% by 2024 driven by - a) deepening relationships with existing customers by providing personalised services, b) cross-sell / upsell based on data analytics thereby improving stickiness of existing customer base and c) focused approach in acquiring new liability customers. Management believes the above mentioned initiatives will not only improve average balances of existing customers but also accelerate new customer additions. Further, with improved CASA share and incremental growth in high-yielding products, it expects margin to improve to 3.5% by 2024 from current level of 2.8%.

- Revamped business architecture and competency building will ensure better underwriting, improved efficiency and effective execution of 6Cs strategy. It revamped organisation structure by - a) adopting "verticalised approach" with segregation of teams for assets and liabilities & underwriting and business functions, b) initiating skill development training across level to build competency, c) strengthening digital capabilities, risk management and analytics, d) dedicated focus on mitigating frauds and improve collection & recovery. Further, it also focuses on creating synergies between cross-functional teams for better customer service and improve cross-sell and upsell to existing customer base.

Shares of SOUTH INDIAN BANK LTD. was last trading in BSE at Rs.9.52 as compared to the previous close of Rs. 9.47. The total number of shares traded during the day was 2657699 in over 72901 trades.

The stock hit an intraday high of Rs. 9.59 and intraday low of 9.34. The net turnover during the day was Rs. 25169661.

Source : Equity Bulls

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