The South Indian Bank Limited (SOUTHBANK) Earnings Call Transcript
October 16, 2026
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to South Indian Bank Q2 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amansingh from ICICI Securities. Thank you, and over to you, Mr. Singh.
Thank you, Ranjhu. Good afternoon, everyone, and thank you for joining the call. On behalf of ICICI Securities, we welcome you all to Q2 FY '27 Post Earnings Conference Call of South Indian Bank. From management side, we have with us Mr. Mahesh Muralidhar Pai, Managing Director and CEO; Mr. Dolphy Jose, Executive Director; Mr. Anto George, EVP and Chief Operating Officer; Mr. Vinod Francis, SGM and Chief Financial Officer; and Mr. Jimmy Mathew -- and Company Secretary, along with other senior executives of the bank. . I'll now hand over the conference to management for their opening remarks, post which we can start with the Q&A session. Thank you, and over to you, sir.
Good evening to all of you, and thanks for joining for the South Indian Bank's Q2 FY '27 Earnings Conference Call. I hope I am audible.
Yes, you are, please go ahead.
So we are joined by my colleagues, Mr. Dolphy Jose, Executive Director, Mr. Anto George, EVP and Chief Operating Officer -- Key General Manager; Vinod Francis, SGM and CFO; Mr. Jimmy Mathew, SGM and Company Secretary, along with other executives. So let me start with the key highlights of the financial performance of the quarter ended September '26. The bank declared the highest of its quarterly net profit of INR 426 crores for the Q2 financial year FY '26-'27, registering a growth of 21% compared to INR 351 crores in the Q2 of FY '25-'26. The total deposit of the bank grew by 19% to INR 1,37,229 crores from INR 1,15,630 crores on a Y-o-Y basis. The gross advances of the bank grew by 19% to INR 1,09,517 crores from INR 92,286 crores on a Y-o-Y basis. During the last financial year, we had done a technical write-off of INR 1,163 crores, excluding the Y-o-Y growth translates to 20%. Total business of the bank grew by 19% to INR 2,46,796 crores. Net interest margin for the quarter was at 3.33 percentage, which was sequentially up by 10 basis points on a Y-o-Y basis and the NIM was up by 53 basis points. The bank was able to show a healthy growth in the average advances during this period with a growth of 20%. Bank declared a return on asset of 1.08% and an ROE of 12% for the quarter ended Q2 FY '26-'27. Bank declared its highest net interest income for the quarter of INR 1,160 crores with a growth rate of 38% compared to INR 808 crores during Q2 of FY '25-'26. Capital adequacy of bank was at 19.40 and the Tier 1 ratio stands at 18.71% as of the half year of September 30, 2026. CASA amount increased by 18% Y-o-Y to INR 40,310 crores versus INR 36,841 crores. The PCR, the provision coverage ratio, including the write-off improved to 97.84 percentage on Y-o-Y basis. This increased from 90.25. The PCR, excluding write-off improved from -- improved to 92.42 percentage from 81.29 percentage during the year. Overall gross NPA reduced by 169 basis points from 12.93 percentage to 1.24 percentage on Y-o-Y basis. The NPA reduced by 47 basis points from 0.56 percentage to 0.09 percentage on a Y-o-Y basis. The slippage ratio of the quarter was 0.09%. Credit cost of the bank for this quarter was at 0.14 percentage. We'll continue the momentum in the disbursements and collections in the coming quarters to achieve the desired targets. I will also take this moment to thank my previous MD and CEO, who was mainly responsible for this quarter, P R Seshadri, for this wonderful performance. And with this, I will -- we will open the floor for questions.
[Operator Instructions] The first question comes from the line of Akshat Agrawal with Nirmal Bang Institutional Equities.
Congrats on a strong set of numbers and many congrats on your new role, wishing you and the bank continued success and greater heights under your new leadership. I have some questions. So is credit cost increased to 60 bps on a calculated basis, and this looks mainly due to the strengthening of the provision coverage ratio to 92% from 81% prior quarter. So what was the rationale for the increasing -- from already very strong PCR. And if you could also help us with the nonspecific provisions, including general provisions, floating provisions or contingent provisions aside from the specific piece here.
Thank you for the compliments first of all. And to answer your question, there are no major concerns as such. If you see the banks, the SMA or the NPA, we are at 1 of the lowest in the entire industry. And for the bank, it is 1 of the best new category. So there are no cause of concern for the credit cost to be slightly higher than 0.09% to 0.12%. There is no cause of concern at this point of time. But being conservative, we thought that this provision should be made. And these are not the floating provisions or the specific kind of provisions. These are all account-based provisions which has been made. So there is no specific one-off provision, which is created. I hope I have answered your questions.
Right, sir. So -- but aside from the PCR, do we have like what's -- the provisioning which would include the contingent floating or standard provisions and what would be that amount on a percentage basis.
We have not done that. We have not done any such provisions. These are all provision for assets only.
Right, sir. And if is there any potential impact of the ECL-based provisioning, I mean, have you -- I mean, in the past, we have -- I mean, -- it has been mentioned that there's not much impact, but is there any change in that versus what we have been told earlier.
No. Absolutely, no. Whatever has been told for a normal, whatever is the impact because as I said, see the SMA current SMA-1, SMA-2 and SMA-0 is one of the lowest. So we do not have any concern in terms of the ECL provisioning at this point of time.
Right, sir. Secondly, on deposit, current account balances increased by 20% Q-o-Q. So if we can understand what drove this sharp increase? And how much of it is attributable to any specific on outflows towards the quarter end. Should we expect this momentum to sustain? .
Yes. So there are little challenges there because you're not seeing the stable flows, which we have received. So there were some one-off flows which of the current accounts which have come in due to some of the IPOs, which were there at the last moment of September. So that is going to be very stable. So there could be some minor slippage in that current account number because it's a substantial number, which is -- which you are talking about. But otherwise, the growth in the deposit and the CASA is stable. But there were some one-off in the IPO funds which we are receiving.
And sir, on the potential implications of the draft bank assurance circular, if we -- if the bank has done some assessment and if we could get some understanding of how much impact would be there, like some banks have told that they're -- like it would reduce by 50% to 60% of what they already had. And sir, on the same fee income part, I mean, we saw recovery during 2Q after seasonally weak 1Q on the fee income. Could we expect further improvement over the coming quarters?
Yes. So there are 2 parts of your question. The first part constitutes to the third-party income, which you are talking about. See, as South Indian bank, we do not have that kind of an impact compared to the other banks because the percentage of third-party income to our total fee income is maybe 5% to 6% or maybe 7%. Very low number, which Vinod can correct me if I'm wrong. So that's the number for that provision. So we don't have that kind of an impact from the circular which has come out from the RBI. Now the second question is about whether this will sustain. So I am pretty sure that this momentum of fee income is likely to sustain in the bank. So that -- because there are no one-offs, and these are core income, which we have designed. And quarter-on-quarter, there is improvement. So definitely, there is going to be improvement from the present position.
And sir, on the returns, we -- I mean if we accrue the additional INR 70 crores to INR 80 crores of provisions, which would have strengthened the PCR, ROA would be around 1.3%. I mean, if you exclude that. So with the potential for NIMs to benefit from the upcoming rate cycle and even exceeding 3.5% possibly, would we have a sustained ROA at like 1.3% level, 1.3%, 1.4% level for the second half and for the next year. .
Yes. You're talking about the immediate next quarter. See, if you exclude that provision, what you are saying, the number could be right what you are saying. But presently, the ROA stands at 1.10%. And of course, our medium-term target will be to reach 1.25% to 1.0%. And obviously, our final -- as a long-term target will be to reach that 1.5% mark. So you're right in saying that if you exclude that, the ROA could be slightly better, yes. Yes, the second part of the question. Yes. So in terms of NIM, we are at currently 3.33%. And see, in the last few quarters, if you see the NIM has been always on the upward trajectory. So our -- even the guidance what we have given was around 3.25%. We have comfortably beaten it in the first half year itself. And it is a sustainable 1 because you see the net interest income which bank has got in the last 3, 4 quarters. So this is sustainable. And definitely, our endeavor will be to move towards 3.40% to 3.50% in the medium to long term horizon.
Lastly, sir, some housekeeping questions. What was the retail and agri book this quarter, it's not disclosed in the last quarter? And if we can also get retail gold book based in the last quarter?
Yes. I think the old partners disclosed there, gold part is.
Retail gold part. I understand the whole gold portfolio, including the agri is sourced, but retail gold.
We'll give you the exact retail growth, maybe subsequently. But I can tell you only one thing that we have a 60% of retail book and the 40% of agri book in terms of gold loan. So that way, we are better doing in retail.
Right, sir. And FCNR deposits and self-leverage we got this quarter, sir?
As far as FCNR is concerned, see, we do not have an outside branch present. So we are not a bank who has received the self-leverage part from that way, what our -- we have got around INR 239 million. And out of that, almost 95%, 96 percentage is true, the direct deposits, not the leverage deposits.
Very well, sir. Sir, just last question. On the cost side, there has been -- I mean, we started employees, branches and technology investment. And with the rate hike, you would benefit from the operating income. So with the -- so should we see like a cost growth, cost-to-income ratio going towards 50% in next 2 years and cost growth remaining in single digit this year and early double digits next year? .
I think we have ice on that because we should see the cost-to-income ratio coming down going forward. But definitely, there has been some cost implications. You are right because of the employee addition and the branch expansion. There have been some addition to the cost. But I feel that the income part should take care of that, and we should be able to deliver what the expectation is there for your side.
[Operator Instructions] Next question comes from the line of Michael Butra with SB Ventures. Mr. Butra, please go ahead with your question. Mr. Butra, please go ahead with the question. Since there is no reply from the line of Mr. Butra, we'll move to the next participant that is -- Kanti lal Shah from Hanuman Holdings Private Limited.
Congratulation for a good set of numbers. I mean, good start you are taking since you have just taken over from 1st of October. Sir, first question is how do you look at the second 2 quarters? And are we any plan for raising the funds or things because the NPA is also at the lowest level of the history of the bank is what I understand. What is the coverage ratio and how we look forward? And are we any plans for raising the funds for the expense and other things or tier bonds or something?
Yes. Thank you for the compliment. And yes, you're right, we are at one of the lowest part in terms of NPA is concerned. But -- the second question...
Lowest in the industry, I think the entire banking industry...
The lowest in the industry. Thank you for that. But the second part of the question is the raising of capital. Currently, the Board has permitted us to raise INR 500 crores of Tier 2 bonds. And we are currently not expecting a raising of capital at this point of time when we are well capitalized at 19.40. So at this point of time, we do not foresee any major capital requirements at this point of time.
What I personally feel our capital also is a lower level. So we have got the scope for even expansion or to raise the capital is not -- we should not be having distraction. So that way, we are in a comfortable position. That's what I feel.
Absolutely, you are absolutely correct. But at this point of time, the growth is priority. So once we have the growth numbers in hand because if you see the historical averages, we have been growing slightly below the average or in line with the market average. So our aim should be that we should slightly do better in that front, then definitely, the credit -- requirement will come in picture. .
[Operator Instructions] Next question comes from the line of Amansingh from ICICI Securities.
Congratulation on a strong set of numbers. So my first question is, we have sequential improvement in yield on advances. So I wanted to understand qualitatively, if there is any incremental increase in corporate in yields in 2 of our main segments, corporate and gold loans, if we have taken any price hike in both of those segments. .
Yes. So the question comes in 2 parts. One, whether there is an increase in the corporate book in terms of yield. So definitely because the corporate mainly gets priced to the repo level. And currently, the repo has increased to 25 basis points. So -- and mainly it is repo or T-bills. These are the 2 aspects of corporate -- So both the aspects, if you see for the last 3 months, there has been upticks in -- up to the extent of maybe 25 to 30 basis points. So to that extent, the new corporate bookings have started increasing. So -- and also the general U.S. -- sorry, general U.S. as well as the Indian yields have moved substantially up in the last few days, it has substantially moved up. So that pricing is getting affected in almost all the corporate loan segment. And in terms of sustainability, I think we should do a little better. So that is what I can say. And in terms of gold loan, at this point of time, the repo price what is there that has been passed on to the new loans, but we have not thought of increasing the spread at this point of time. So if it is felt that there is a need, definitely, bank will not stay to take that part.
All right. And sir, can you give me a split between EBLR and MCLR loan book of the bank and EBLR repo and T-bills separately available? .
Total EBLR linked book will be around 43 percentage. Out of that 43% is we will have -- the ratio will be 20:23, you can say approximately. That is a T-bill and repo. And in terms of MCLR, it is very negligible, it's a 5 percentage.
Got it. And sir, last question on growth. So disbursement growth has reserved materially this quarter. So can you give some insight on which segments are driving this growth? Is it wholesale? Or there is some pickup in some retail segments as well as the disbursement? .
The retail segment is currently outperforming the wholesale segment. I can tell you that, that there is a significant amount of push happening and there's growth happening in retail side. So retail when I say it is MSME retail and then -- B1 is uptick in disbursements, whereas that much growth is not seen in the wholesale segment.
Right. Sir, just a clarification. So you said EBLR book is 43% and MCLR is 5%. So it would be fixed, 50% book is fixed.
Yes. EBLR T-bill will be 46%. Fixed is around 47%.
Fixed is just 47%? .
Yes, yes.
[Operator Instructions] Next question comes from the line of Karan, an individual investor.
So first of all, congratulations on a great set of numbers. I just wanted to ask 1 question that what is the outlook and guidance on loan and deposit growth for the bank for FY '27. And what is the medium-term guidance? And which segments do you expect to drive a major growth.
Yes. So in terms of guidance, bank has already given a guidance of 15% to 16% in terms of loans and deposits. I think we would like to stick on to that. But preferably, it will be in the higher bucket of that guidance, what we have given. So overall, we should expect around 16% kind of a growth. But one thing when I talk about 16%, the market growth will be the factor for growth benchmark. If the market is growing at slightly above that, we will try to do better than that. So that will be our guidance. But in general, we stick on to the guidance what we have given for the segments. And in which segment we are growing, of course, you are seeing the growth on the gold loan book, which we have already 41% growth which we have seen. So we will continue to do focus on the gold loans. And we will also focus on business loans and MSME loans. So this will be the order of priority. And we'll not leave the personal loan segment as well.
[Operator Instructions] Next question comes from the line of Jai Mundhra with ICICI Securities.
I wanted to understand a broad strategy, right? Now you have a decent -- I mean, full term and maybe beyond that also. The bank has come a long way in the last 3 years from maybe one of the highest net NPA to lowest net NPA. The growth was also earlier single digit and now at least the 2Q is above system. And all the while ROA has been maintained at more than 1%. I wanted to check, sir, you mentioned 15%, 16% loan growth and within which you will try to outpace system. Are you confident of doing that along with sustaining or, let's say, the current 1.1 and even increasing that. So I wanted to check, sir, on loan growth, are you comfortable that now the bank will be at least doing similar to system or slightly ahead of the system? Or do you believe there is still some loan mix tweaking that needed to be done from current quarter onwards.
Yes. So I'll answer the last question first. That means the loan tweaking of per segment. So the tweaking of segment is a continuous process. So this has to be done even today because currently, we are at 39% corporate and 61% retail. So always, we have been talking about a 35% kind of a range for corporate and 65% of range for ramp. So there is some more work to be done in terms of tweaking, but the system has started doing by itself. That is why the NII has started improving by its own in the last 2 quarters. So that will continue. So while I say that, I don't see that the ROA will be likely to remain at this level. I am pretty sure that this is likely to inch up from the 1.1, which we are currently at to 1.20 and 1.25 levels very shortly, maybe in a year it will be that kind of a movement. You should see sequential improvement in these numbers.
All right. Sir, the growth reset that we say of 15%, 16%, that is even after including the thing that the corporate mix may come down by 200, 400 basis points, right? So the rest of the portfolio has to grow at a much faster pace?
Yes, retail should grow at a faster pace. Internally, we have taken a target that we'll be -- the growth in retail will be higher than what we are talking in the terms of corporates. .
All right. Okay. And sir, with any -- now with this -- the OpEx that last 2, 3 years, I think the bank was a little bit I would say, adrift in doing OpEx. Do you see a window to sort of start investing more in the branches or manpower or technology. Or you believe this 10%, 12% kind of an OpEx is sustainable at least for the next 2, 3 years, that is 1, 2 year?
So when I spoke about growth, we have already highlighted that there will be more number of branches. Bank has already owned around 11 branches in these last 2 quarters of this financial year. And if you can see the hiring or so, there has been some additions in the hiring. So we will keep up the pace because we are opening the branches, we can't say that we will hire the people, we'll not hire the people. So that will also interest. But one thing we'll say you that there will not be any -- what you can say, the ratios will remain the better rather than saying that OpEx will go up substantially, no, it will not go up substantially. But in line with the branch expansion, the IT also needs to expand and things like that. So we will be in line with that.
Right. No, no. So the idea is, will OpEx be faster than loan growth or will be similar or maybe much lower than the loan growth. That is the...
It will be -- OpEx growth will be lower than the loan growth. There will be OpEx growth, but it will be lower than loan growth.
Understood, sir. And on gold loans, sir, what your -- so corporate, you mentioned that maybe the idea is to move to 35% share. What is your thought process? Because South Indian Bank is anyway great in gold loan, but your -- you have a very strong experience there. So what is your thought process as to how much could the gold loan share be over the next 1 year for this bank?
I'm pretty confident we are currently at 25% of the portfolio is under gold. So bank already is targeting to take it up to 35%. So that I will stand by that as a first phase, then let us see how the industry evolves. And then from there, we will take out. But at this point of time, the focus will be to take it up to 30%, 32% levels immediately.
Right. And sir, this gold loan growth that is there at 40% odd, that is coming across agri and retail? Or is this lopsided in favor of any of the retail or agri gold loan?
No, I think it is pretty much there in both the segments. I will put it that 60% of our gold loan focus from the retail segment and 40% is coming from the agri segment. So in that case, also the growth is also towards retail segment because there are a lot of restrictions which has come in terms of agri lending in terms of gold loan. So there more restrictions are there. So generally, the people will tend to keep where restrictions are less. So the retail will be slightly outpacing the agri.
Sir, do you have the number for the split between retail and agri or this INR 26,000 crore portfolio?
Yes, it is around -- INR 15,000 crore is around in retail and INR 10,000 crores is around Agri.
Right. So sir, now the yield differential, is there any yield differential in the way you charge retail gold loan and agri gold loan?
There is a minor yield differential in favor of retail. That means retail yields better than Agri, you can say.
Okay. But that is like 25, 50 basis point only? Or is it like material.
According to me, it will not be more than 25 basis points. .
Okay. And what is the blended yield on gold loans, sir? Because I think this proportion is going to rise. So I was just trying to understand what is the blended yield that you charge on gold loan?
It's closer to 10%, I can say.
Okay. Now -- okay. So this is understood. So then the export is also good. And now, sir, your technology, your view on -- because you have also come from digital. I mean, you have had very good exposure at digital and technology. A, do you suspect any major technological revamp or any tech exercise, which may or may not involve OpEx but may reset some of the growth journey. Or you believe tech will be minor changes here and there and which will not jeopardize the ongoing growth trajectory.
See, for South Indian Bank, whatever journeys, whatever stories we are seeing about the tech has already been done in terms of technological advancement. Yes, but it's a refinement. It's a process of refinement. And also, whenever something new comes the technology should be ready to go for it. So that way, it is an ongoing process I will say. But there is no major technology overhaul or anything -- any of that things are required. But our focus will be, as the tagline suggest, next-gen bank, so our endeavor to be to provide the next gen technology to the customers. And also as a part of that new segment, which is evolving in the artificial intelligence segment in the banking. So there, we will be focusing slightly more so that we can have more efficiencies in terms of processes and projects. So that's where we will be tracking.
Right. All right. And sir, if you can -- request if you can add some of the loan book classification, which we used to have. Now, I think, 1, 2 quarters that is not there and there is not much detail on the fee income. And I mean, if you can specify how much. So I wanted to know, sir, this INR 190 crores of fee, which is -- sorry, which is other. INR 190 crores. So INR 190 is crores fees is okay, INR 80 crores is treasury ForEx, but what is this other INR 90 crores.
Yes, I'll take it. This miscellaneous income is INR 190 crores. That includes one of the major component is bancassurance income. So that and the amount recovered from technically -- accounts. This major component that comes into play of this INR 190 crores. So this quarter, for the amount -- recovery from technical returns to accounts amounts to INR 73 crores.
And bank side, sir?
Bank fees, that we will be ranging around say INR 30 crores to INR 35 crores. .
Okay. And Vinod, I mean, difficult to at least look into FY '28, but this INR 70 crores and INR 30 crores, INR 35 crores numbers, these are broadly sustainable at least for the next 2 quarters.
Definitely for the bancassurance, it is sustainable. And for the recovery part, as we have already been mentioning, for the current financial year, we don't find any major threat for that recovery amount. But going forward, recovery will be declining. Because the stock under the recovery is also getting as you know, that our slippage is also on the lower side, right? So that is there. But on an average, we expect that INR 50 crores to INR 55 crores to be there. .
Right. Understood. And lastly, sir, any broad you have -- any 3-year view or a road map, if maybe this quarter or maybe next quarter, if you can provide a 3-year roadmap, it will be really helpful. You have given some glimpse. I know, over the next 2, 3 years, you want to achieve 5% ROA. But if you have slightly more detailed vision, it will be very, very helpful to understand the future journey.
Yes. We'll take it and we'll provide. We'll give you shortly or maybe it should be available very shortly. .
Next question comes from the line of Sandeep Joshi with Unifi Capital.
Most of my question have been answered. I just had a couple of data keeping questions. So within the movement of gross NPA, the addition line item, I just need a breakup of that between recoveries and upgrades and write-offs. Would you have that handy?
Can you just come back on that question, Sandeep? .
Yes. So within the GNPA movement, I want the breakup of deductions, which is INR 188 crores. I want the breakup of that between recoveries and write-offs.
So the recovery from the technical write-off is around INR 73 crores. And the normal recovery that comes as a part of the -- from the GNPA pool, that is around INR 55 crores. Then other cash recovery is also coming INR 58 crores. And the technical write-off, what we had done for the current quarter is INR 34 crores. That is the credit card board.
Okay. Do you have same number for last quarter as well.
Last quarter, I don't have it now, but I can provide it later.
Next question comes from the line of Parth Gupta with 360 ONE Capital.
Sir, my first question is on the cost to income, what are the steps that you will take to bring the cost to income down. That's my first question. And second is what -- or within the cost line item, which line items do you think can -- there are levers to those costs down going into over the next 3 to 4 quarters? .
I think one of your earlier colleagues have told that there is a very -- So I think there is not much to control in terms of cost as such because we are talking about the growth, and we are talking about employee additions and branch actions. So the cost will be -- we don't expect that it will come down, but it will be stable. And the income part will outpace so that we will have the better cost-to-income ratio in front of you.
Okay, sir. And the second question is what are the 3 key immediate priorities for you for improving the ROA of the bank for the next 1...
So our term priority is that to continue what the previous management has been doing. So which is the change of the mix, which we are talking about from the retail to corporate. So I don't want to give you a number, but the overall scheme of things. What we want to do is that to be -- lower-yielding advances to increase it to the higher-yielding bucket. And that will be the first priority, which we would like to continue. And on a sustainable basis, the average advances should grow. And only the income can be increased. So the portfolio mix change, the sustainable growth in the advances and also the gold loans. So the focus will be again on the gold and there, we would like to do better by taking -- by making the customer experience better. So that will be the priority.
Next question comes from the line of Devesh Kayal from Boring AMC.
So to understand, basically our interest expenses growth over the past 2 quarters have been around 5%. And if you see other peers from Kerala, South India, they have made their interest future...
Sir, can I pause you for a minute. I'm not able to question properly because there is a lot of echo in the port. Can you just reframe or can you just repeat?
Yes. My question is on the interest -- interest expenses growth, sir?
Interest expense growth?
Yes, yes. So interest expenses growth for us have been around 5% for Q1 and Q2. So -- and it has been on the lower side versus our peers. So that is a good thing. I just wanted to understand if you can give some color what has driven this. So -- and we see that the bulk deposit has shot up in this quarter. So how do we see it going forward?
Yes. So in terms of the pricing or the cost of deposits coming down is mainly due to the repricing effect which has taken place because last year, what our contracted were at a very high rate and deposit rates because of the liquidity has come down generally in the first 2 quarters. So that is one of the reasons for lower deposit to cost, which is coming up. And bulk deposit, which has increased, that was due to mainly the opportunity was available because after the FCNRB liquidity increase, the bulk deposit rates have been substantially lower even than to the retail deposit rates. So bank has taken some advantage of that and deployed it in a profitable manner. So that is -- that bulk deposits has been...
Okay. So our cost of funds shouldn't materially increase somewhere?
No, no, no. .
Next question comes from the line Saket Kapoor with Kapoor and Company.
Sir, firstly, pertaining to this that INR 190 crore other income number, I missed the calculation part and what is the likelihood reoccurrence of the same, extending the nature of the same? .
Yes, Vinod.
So as I've explained, this INR 190 crores, we don't find any one-off items for the current quarter. So we expect that this is a sustainable part. Only thing is that one of the component that comes into this is the recovery from technical return of accounts. So currently, we are having a range of, say, INR 50 crores to INR 55 crores, which we expect to continue in the coming quarters also. But over a period of time, maybe after say, 4 to 5 quarters or 6 quarters, this amount is tally to come down because of the nonexistence of the NPA stock. So there, we expect a slight decline over there. Otherwise, that will get compensated by the income increase in the other heads. So definitely, this INR 190 crores, we expect that is sustainable and is expected to increase because one of another major component is the bancassurance income, which we are steadily focusing on.
Okay. SP307264873 Sir, taking into account how we have closed H1 on a very high. Q-on-Q also, the operating profit has gone up from INR 592 crores to INR 732 crores. So anything to account the improvement in loan growth, what should investors expect H2 to be on account of the high base of what we have reported for H1, sir, in the very likelihood.
See, certain things like your NPA, there are very little chances of us to reduce it further. So in terms of that, there is very -- see, we are at 1 of the highest net NPA. That means the lowest -- best you can say the net NPA bank in the country. So that way further reduction from that is very, very challenging Same is the case with some of the items like SMA. We have been doing very good as SMA coming down all along the last few quarters. So maintaining that will be the great opportunity and challenge for us. We will be trying to do that. Having said that, all other business parameters, as I was mentioning earlier, we were either quickly below the market or in line with the market. There, we have scope for improvement, which will overall improve the income components of the bank.
So sir, taking into account the rate curve, which has changed now on the higher side, how likely would it be interest income or the NII are likely to shape up for H2. And with the hardening of the yields, what portion of our treasury book will get impacted. What was the impact for -- about this quarter, sir? .
Yes. So in terms of NII, I think the major component of our hit has been changed on the T+1 basis itself. So as soon as the -- we have mentioned earlier in some other reply that around 43% of our book is EBLR-linked and which is repriced immediately. -- upon the change of report. And also another 25% to 30% of our book is in terms of gold loan where the pricing will happen even though not on T+1 basis, but new notes will be booked at the new rates. So there also, we are getting the cost advantage. So all put together, you should see a positive impact from rate hike, which is happening in the bank's balance sheet. Coming to the -- what was the last question?
Treasury impact Yes. Yes. Hardening of the yield.
Hardening of the yield, I can only tell that last quarter, even though the yields have hardened from INR 680 to INR 7.19 the impact of that was very little compared to many other banks in our bank. So that way, it was positive. And in terms of the rate going up from that 7.19 towards currently at 10.40. See, every basis point will result in approximately INR 1.14 crore to INR 1.1 crores for us. So that is what's the indication I can give you at this point. But it's not a phenomenal -- it's for the entire market.
So you mentioned every bps will result in a INR 1.5 crore MTM for us.
1 to 1.1.
And that was the same number for the September quarter also since the movement has been from 680 to 790.
Yes, correct. .
Okay. And sir, other parameters like our NPA, you have mentioned that we are on a solid track, and there is very little room to improve on the same. But on the NIMs part, what other levers are there for us? Or what should be the trajectory on the NIMs and the ROA that we may transcend going into the H2 and the way forward?
In terms of NIM, currently, we are at 3.33%, wherein the guidance was 3.25%. So already, we have crossed the guidance what we have given. And we believe that this repo rate will hike and be consistent churning what we are doing, the NIM should improve and move towards 3.36 to 3.38 levels in the shorter term. And of course, in the longer term, our 12 months or 4 quarters guidance will be around 3.45 to 3.0, we should take. So that is what stands for NIM. And in terms of ROA, we are expecting the medium term, we should reach somewhere closer to 1.25, 1.30. And from there, we should move towards the higher levels. .
Okay. And lastly, on the liability franchise, sir, how will that -- our deposits are going to get repriced? Or what percentage will come for renewal for H2? And what would be the likely impact on the bit of the cost to income because of the revision in the deposit rates also?
Yes. So in terms of deposit rates, still we are at a lower level than what it was in the last year at this point of time. So whenever we are expecting generally, our deposits are renewed -- getting renewed in a year's time. So if you consider that, I think these next 2 quarters may not have substantial repricing affecting the in terms of deposits. It's getting repriced at a lower rate.
So in totality, the working environment provides improved set of operating environment for the bank for going into...
Absolutely correct. Absolutely correct. .
The next question comes from the line of Vivek Singh, raise Securities.
My question is on the broader strategy part. So like you said, the focus will be on the ramp segment, and you want to take the ramp to 65%. But in past also, we have been focused on the MSME. But if you look at the traction, so there has not been much traction. The large part of the growth has always been driven by the gold loans, even in this quarter, if you see corporate and gold, they contributed at around 80% of the incremental growth. So what are the segments that we are focusing on within the ramp segment to drive this mix and to drive the growth further.
So you are right that we have been talking about the segment change and the segment changes not happening. That is what one of the concerns, which you have raised. So I agree that it's a challenge. So it's not easy that because you have to maintain the pace also. So if you are to maintain the pace and then you have to change the mix, that means the retail should do much better. That means that other than ramp should do sorry, other than corporate should do much faster than the corporate growth, which is not happened. So that is the reason why we are able to show only this kind of movement where the -- it is in and around 40%, the corporate segment. So this will be a challenge, but definitely, if we are to deliver on the MSME segment, which we are confident that going forward, that opportunity will arise. And there are opportunities in the market, we will definitely tap MSME opportunity. And I'm sure that the verticals, what the bank has created in the past, the mid-corporate vertical, the MSME segmentation of credit, all those things should fire up going forward.
And sir, has there been any changes made in terms of the structure of the branch or the underwriting strategy going forward? Because in the past 2 years, there have been a lot of changes done on the branch level. So are we achieving the same -- you're looking to implement some new strategy?
Absolutely, no change in the strategy, what we have been doing. We will need to do better in the and we will not change the strategy or the structure or strategy, we'll not be changing. Only thing is that where our little bit tweakings are required, we will do that rather than whenever you change -- whenever new MD comes, then if you start changing the system, it changes the whole ecosystem. I mean that, right? So I believe strengthening the existing ecosystem rather than making a change to the ecosystem. .
Got it, sir. And sir, in terms of ECL preparedness, so how are we placed? So will be -- will the bank will be able to complain on those very first day implementation? Or are we looking to take a client.
So the client part is provided to all the banks. The only thing is that we will have to take a call at that point of time, we'll be taking a call, but at this time, it's too early for me to give a comment on whether we'll be going for a client path or others.
In terms of the total quantum of the requirement, any number?
It's not very substantial. That much I can say. It is not very substantial because you can see from my balance sheet itself because the SMA numbers are at the lowest, the net NPA numbers are at the lowest. Provisions have been kept for all the cases wherever required. So all these things, given these things, the numbers for ECL is not going to be very substantial. .
Next question comes from the line of Amansingh with ICICI Securities.
Just a few clarifications. So firstly, on treasury, as we understand most of the treasury gains are being routed, treasury loss or from MPMR are routed through AFS. Could you help me with what was the hit on AFS reserves during the quarter?
So I'll take this. So as on 30th September, we have a debit balance of INR 43 crores.
And sir, what was the opening for the quarter so we can understand the impact in this quarter?
Impact for the current quarter was close to around, say, INR 50 crores to INR 53 crores. .
INR 50 crores to INR 53 crores. And sir, just a clarification, the impact on the rate hike, yield hike or 1 basis point it would be INR 1 crore is on MTM gains or is on NII.
It is on MTM case. Gains or loss.
And sir, lastly, we can see there is some IBPC book that the bank still has. So what is your view on IBPC. Will the bank continue to do that business or it would be gradually -- it will be gradually go down?
No. See, it's all dependent on what rate we contract. It's not that we are allergic to IBPC or not allergic to IBPC. It is not like that. But if it is making a business sense, we will continue to hold on to that and if it does not make a business sense, we will be exiting that. But of course, it's a good number to -- currently, it's a good number, which we have. So it will be very difficult for us to entirely say that I will not hold any IBPC in the next quarter. That would be very challenging. .
Ladies and gentlemen, that was the last question for today. We have reached the end of question and answer session. I now hand the conference over to the management for closing comments.
Yes. So on behalf of South Indian Bank, I will request our Executive Director to -- yes.
Good evening to all. So I just want to -- I heard most of the questions. So just to give a brief from my end is yes, there has been the effort against the advances mix is still on and we pursue that for sure. The numbers may not be very encouraging and you see that, yes, we have posted 1 basis point from corporate share from 40% to 39%. And the retail agri and MSME segment has grown 61% is the overall advanced contribution. It may not be very encouraging. But the -- we are not really marginalizing corporate, but we are progressively improving the contribution of retail and MSME to the bank. And the bank's growth and earnings growth. The objective is better balanced portfolio with stronger risk adjustments. So going forward, yes, there will be marginal growth of retail, agri and MSME as a contribution to the overall advances, which you will see, but it will be gradual. But the focus is going to be on better balanced portfolio with stronger risk-adjusted returns. On the OpEx side, I mean I've had multiple questions on the OpEx side. So yes, whether we will need to invest for growth, we will. I mean that's a no-brainer. We have to go to the next level of growth, and we invest and then scale. So there will be additional OpEx, but our intention is to ensure our operating profits will be always higher than the incremental OpEx. So that is going to be there, and we will very, very closely this and take whatever judicious steps we have to take towards it. That's about all from my end. Thank you very much.
Thank you all for joining us.
Thank you. On behalf of South Indian Bank, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
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