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08 July 2016
From Annual report 2016:
SIB has focused its business operations in southern India; with dominant
presence in Kerala. With >80% of the network located in Southern India and
almost 54% in Kerala, SIB generates almost 45% of the loans from the home
turf and 33% from south India.
By virtue of the banks favorable geographic location and healthy relationship
with the locals, SIB derives benefits in terms of increased NRI business (NRI
deposits form 25% of total deposit base-Q3FY16) and gold loan business (gold
loans form 15.5% of total loans); maintaining its market share.
Going forward SIB aims to focus largely on moving out of home turf and
increasing its pan-India footprint (aims to add 50 branches/extension counters
every year) by focusing on high growth geographies (Tier I and Tier II),
opening cluster branches and smaller branches in the vicinity of one big unit
and improving branch profitability. This should enable the bank to reduce
dependence on home state paving the way for growth and scalability.
Replacing big ticket loans with working capital financing to SMEs, SIB has
strategically adopted cautious approach. De-focusing from beleaguered
power and infra sectors, the bank has tilted loan book towards retail (auto,
housing, gold, LAP), SME and agriculture loans.
As at the end of Q3FY16, the corporate book stood 40.9% of total loans, retail
(ex-gold) at 19.5%, SME at 22.4%, agri 13.7% and gold at 3.6%. Against this
backdrop, we believe SIB is set to clock 17% loan growth during FY16-18E
As per the Management, the stressed assets have already been cleansed and
the bank continues to provide aggressively with no meaningful delinquencies
expected to emerge ahead.
With corporate loan book witnessing stress, SIB strategically has planned to
diversify into retail segment (through home, auto, MSME and LAP) capitalizing
upon the existing set of customer base and strengthen MSE relationships.
The Bank had been successful in widening its network pan India with 831
branches (grown ~2x duirngFY05-FY15) and 1260 ATMs (increased ~10x
FY05-FY15).
Strategic Positioning: High market share in both advances and deposits
amongst the old generation small private banks. 60% of the total branch
network is located in semi-urban and rural areas.
Competitive Edge : SIB happens to be the first Kerala-based bank to
implement core banking system. 81% of its lending is to investment grade;
this largely guards on asset quality. 71% of liabilities will be re-priced within
one year; boosting its pricing power. 17% of the agri and SME loans are
backed by additional security by way of gold. Young workforce (average age
of employees 34 years); has aided cost efficiencie
Competitors: DCB Bank, Federal Bank, City Union Bank, Karur Vysya Bank,
ING Vysya Bank, Jammu Kashmir Bank.