South Indian Bank Q2 net profit rises 18%; employees base declines on automation gains Mumbai

South Indian Bank on Wednesday reported an 18 per cent increase in its September quarter net profit to Rs 325 crore, mainly driven by treasury and forex gains.

The lender's core net interest income grew 6 per cent to Rs 882 crore on the back of a 13 per cent growth in advances and 0.07 per cent narrowing of the net interest margin to 3.24 per cent.

Its managing director and chief executive PR Seshadri made it clear that the margin crimp was not due to issues on the deposit franchise front, pointing out that its cost of funds has declined sequentially.

However, other factors like a large part of the portfolio being linked to the T-bills, which saw a decline in rates, booking agri loans losses and inability to drive higher rates from corporate borrowers constituting 40 per cent of the book led to the decline in the NIM, he explained.

The non-interest income rose 26 per cent to Rs 449 crore during the reporting quarter on the back of more than doubling of the gains from forex and treasury gains at Rs 106 crore.

Its overall provisions doubled to over Rs 116 crore, mainly due to the bank's focus on increasing the provision coverage ratio to over 80 per cent, he said.

On the asset quality front, it witnessed an improvement in the gross non-performing assets portfolio at 4.40 per cent against 4.96 per cent from the year-ago period. The fresh slippages were stable at Rs 3,731 crore.

Seshadri said the bank is focusing on widening its yields by putting more thrust on loan products like loans against property, credit cards and home loans.

The unsecured portfolio, including credit cards and personal loans, is under 5 per cent of the overall book and manageable, he added.

The overall capital adequacy stood at 18.04 per cent with the core tier-I ratio at 16.63 per cent, he said, adding that there are no plans to reduce the levels.

The overall employee base reduced to 9,667 from 9,962 in the year-ago period, and the CEO attributed the same to the benefits of automation.

The bank scrip closed 6.51 per cent up at Rs 25.51 apiece on the BSE on Wednesday against a 0.39 per cent correction on the benchmark.