South Indian Bank

South Indian Bank conference call was a delight to listen to.
Some takeaways from Q2 and Q3 Conference call.

1. Chasing for quality or bad credit habits – Their Yields on loans are a bismal 8.84% which is less than even average home loan rates in a city like Mumbai. There could be two reasons for this, one is bad pricing and bad practices in old book as the yields have increased in new book, or they are chasing quality at right yield. I think the old book is probably badly prices with biased lending and new book is purely quality as seen in SMA and GNPA.
2. Focus on balancesheet quality not growth – as per call they are very focused on bringing PCR and NNPA to a respectable levels of 75% and 2% respectively. Very carefully executed strategy to replace old or say bad book with good book or say new book (Does this ring a bell, exactly done by other bigger bank and we know the share price it had in recent past). This strategy is already bearing some results in form of better SMA and GNPA on new book and using that profits to wash sins of the past.
3. Focus on NIM and right pricing – The mamagement has lazer sharp focus on right pricing assets as well as liablities, leveraging their strength in NRO-NRE markets as well as local goodwill in sothern India. They were categorical on specifying that if the asset sode customer is good enough to retain them they will or take tough call to customer go but price their assets correctly.
4. Model based approach in credit and monitoring – The MD and CEO is ex-icici bank guy and brings with him clarity on the approach he wants which is based on tried and models and not judgement when it comes to credit apraisal and continous monitoring, this seems to be showing good results as of now, need to see the book season to assess its effectiveness.
5. Focus on technology – the management is said to invest anywhere between 180-200 crores in technology for making platforms for on-boarding and lending based on their Model based credit assessment. SME and retail platform should become live within 2 quarters. Bank has already got a few awards for their technology in recent years.
6. Focus on partnerships and co-lending – bank is aggressive in co-lending woth various NBFCs and partnerships for credit card offering and already onboarded 185000 new credit cards with a decent book of 712 crores.

The thing I like about the current MD and CEO is that he is like a horse that runs with blinders, focused on finishing race on his own terms and not wavering with temptations like high NIMs or high growth or trying to play the game they are not capable of at the moment, along with the excellent executation capablity shown after he joined the bank.
Invested and biased having highest allocation on this stock taken recently.