South
Indian Bank cash flow turns negative
Mumbai February 08, 2006
Crisil Marketwire
Business Standard
South Indian Bank, like most other banks in the country,
has been plagued with the problem of mobilising low
cost deposits.
The problem of credit growth outpacing deposit growth
has led to a negative net cash flow from investing
activities in the first half of the current financial
year.
“Since outflow through advances was more than
inflow through deposits, the cash flow was negative,”
said treasury head M S Mani.
The bank’s cash flow from investing activities
was Rs 10.76 crore in the first half of current financial
year.
Moreover, the bank has 26 per cent of statutory liquidity
ratio portfolio, which is marginally higher than the
mandated 25 per cent. Therefore, the bank has almost
no room to fund its credit growth by selling government
securities.
“We shed off Rs 500 crore of high cost debt which
reduced our cost of deposits,” said chairman
and chief executive officer V A Joseph.
However, the old private sector bank was not able
to mop up similar amount of low-cost deposits, which
led to a slow deposit rate growth.
Deposits in the third quarter ended December grew
12.8 per cent over a year ago while advances grew
18.96 per cent. “We have consistent deposit
flow from our non-resident Indian customers,”
Joseph said.
Besides low-cost domestic deposits, the bank will
depend on the NRI deposit flow to augment its deposits,
Joseph said. NRI deposits consist of 34 per cent of
total deposits.
“Now NRI deposit rates are also almost similar
to domestic rates at around 5-5.5 per cent,”
Joseph said.
The bank aims at 20 per cent deposit growth and 30
per cent credit growth in the current financial year,
said a top bank official.
The net interest margin of the bank is 3.35 per cent
and net non-performing assets is 3.09 per cent.
The official declined to be named as the bank cannot
give any forward looking statement ahead of the 1.50-billion-rupee
follow-on public issue.
The bank has drawn up a three-year business target
plan.
“We aim to achieve Rs 16,000 crore by March,
25 per cent business growth in 2006-07 and 20 per
cent in 2007-08,” the top official said.
The Kerala-based bank plans to expand its branch network
in the north. It hopes to get license from the RBI
to set up around 20 branches in the next financial
year and will set up three branches in Lucknow, Bhubanseshwar,
and Bhopal in next one month.
The bank has 433 branches, out of which only 42 are
in the north.
