South India Bank: Retail segment gaining focus; Asset quality pressure to ease gradually
(SIB IN, Mkt Cap USD0.4b, CMP INR16, TP INR20, 24% Upside, Buy)
We met the MD & CEO and key management of South Indian Bank during our visit to their retail and IT hub in Kochi. Key takeaways:
Retail Banking gaining focus
Declining market share in its home state of Kerala has been a wake-up call for SIB. To recoup the recent loss in market share, SIB now aims to leverage its existing customer relationship by cross selling. The bank has constituted a separate ‘business development channel’ in addition to its existing branch network to speed up the sourcing of retail products. Also, the bank has centralized and automated its retail and SME lending operations, account opening operations and IT operations over the last two years.
Tie-up with DSAs and OEMs to augment retail loan sourcing
SIB has signed up with 200 Direct Selling Agents (DSAs) in six locations (excluding Kerala). For auto loans, SIB has added 76 people through Teamlease on an outsourced basis. SIB has also tied up with OEMs like M&M and TAMO for passenger vehicles and aims to significantly expand this relationship (186 branches identified) in different geographies.
Progress on key retail products
South Indian Bank Limited. The South Indian Bank Limited (the Bank) provides retail and corporate banking, Para banking activities, such as debit card, third-party product distribution, in addition to Treasury and Foreign Exchange Business. The Bank's segments include Treasury, Corporate/Wholesale Banking, Retail banking and Other Banking Operations. The treasury services segment consists of interest earnings on investments portfolio of the Bank, gains or losses on investment operations and earnings from foreign exchange business. The Corporate/Wholesale Banking segment provides loans to corporate segment. The Retail Banking segment provides loans to non-corporate customers. The Other Banking Operations segment includes income from para banking activities, such as debit cards, third-party product distribution and associated costs. The Bank has a network of approximately 830 branches, approximately 40 extension counters and approximately 1,290 automated teller machines (ATMs) in India.
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