In an interview to CNBC-TV18, VA Joseph, MD & CEO, South Indian Bank spoke about their loan portfolio and impacts of rising gold prices.
In an interview to CNBC-TV18, VA Joseph, MD & CEO, South Indian Bank spoke about the latest happenings in his company and the road ahead.
Below is an edited transcript of the interview on CNBC-TV18
Q: How have things been of late with your gold loan portfolio and the book over there? Till two-three months back, there were some concerns. Gold prices had fallen quite a bit. There were some concerns on non-performing assets (NPA). Now that gold prices are back to all-time highs, what has been the situation over the last couple of months or so?
A: Even when the gold prices have fallen there are absolutely no issues as far as our bank is concerned, because we have been maintaining adequate margin. So it never happened that the price has fallen below the margin what we have been keeping. So we are quite comfortable. With the rise in gold prices now the securities have become much more than what is required. It has appreciated very well. So there are absolutely no issues.
As far as South Indian Bank is concerned, as you maybe aware, around 22 percent of our advances are under gold portfolio, which is very well managed and there are absolutely no issues.
Q: With gold prices rising once again is interest back in gold loans? Can we see a higher growth rate in the gold loans?
A: We have taken a decision to keep it at a maximum of 30 percent of our total advances, so there is a gap of another 8 percent for us to grow and definitely we will be growing this gold loan portfolio during the current year.
Q: Your Q1 did not look too good in terms of asset quality. Both the gross NPAs and net NPAs went up quite significant Quarter-on-Quarter. In Q2 do we expect some of that to come back or would it remain at elevated levels?
A: Even after this slight increase also in the last quarter if you look at our net NPA is only 1.12 percent which is much below the average of the banking industry and I am very sure in the coming quarters it is definitely going to improve.
Q: Are there any plans of increasing your base rate? Have you taken the decision?
A: There are no immediate plans. Our Asset-Liability Committee (ALCO) will be meeting shortly and then we will take a decision. As such no decision has been taken for increasing the base rate.
Q: When is the ALCO meeting?
A: Next week we will be having an ALCO meeting when we will take a decision whether to increase or not.
Q: What is your own personal call? Do you think the rates need to go up in the system right now?
A: We may not be thinking of it immediately, but we will discuss with the ALCO members and taken a decision.
Q: Even last quarter your net interest margins (NIM) were under pressure. Do you see a possibility of NIMs contracting even in this current quarter on account of the rise in your cost of borrowings because of the tightness in the market?
A: As a policy, we want to maintain the NIM at 3 percent. Last year, because of the interest reversal of some major accounts, which have become NPA, the NIM has slightly come down below 3 percent. But we are confident, in the coming months, we will be able to make it up and maintain NIM of 3 percent.
South Ind Bk stock price
On February 28, 2015, South Indian Bank closed at Rs 27.55, up Rs 0.05, or 0.18 percent. The 52-week high of the share was Rs 35.05 and the 52-week low was Rs 20.60.
The company's trailing 12-month (TTM) EPS was at Rs 3.08 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 8.94. The latest book value of the company is Rs 24.95 per share. At current value, the price-to-book value of the company is 1.10.
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