The South Indian Bank Limited (SOUTHBANK) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to South Indian Bank Q1F527 Earnings Conference Call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of the call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Aman from ICICI Securities. Thank you, and over to Yumsam.

Thank you, Ranju. Good afternoon, everyone, and thanks for joining the call. On behalf of ICIC Securities, we welcome you all to Q1 F527 Post-Earnings Conference Call of South Indian Bank. From management side, we have with us Mr. E.R. Sheshadri, Managing Director and CEO, Mr. Dolphy Joseph, Executive Director, Mr. Endo George, EVP and Chief Operating Officer, Mr. Vinod Francis, SGM and Chief Financial Officer, and Mr. Jimmy Matthew, SGM 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.

Thank you very much, Aman. Good evening to everybody on the call. Thank you very much for joining us for the South Indian Bank Limited Q1 Require 27 earnings call. My colleagues, as Aman had mentioned, are with me in the room, and we look forward to our conversation today. Let me preface the conversation that we are going to have subsequently with some of the key highlights from our financial performance for the quarter. The bank declared net profit of 378 crores for quarter 1 FY26-27, registering a growth of 17% compared to 322 crores in Q1 FY25-26. Total deposits grew by 11% to 125,817 crores from 112,922 crores on a YOI basis. Retail deposits, which excludes bulk deposits, grew by 14%. That is to say that whilst total deposits grew by 11%, Retail deposits grew by 14% to $124,306 crores from $109,368 crores. Gross advances grew by 17% to $104,368 crores from $89,198 crores. During the last financial year, we had a technical write-off of Rs. 1,163 crores, And if we were to exclude the impact of this, Then the YOY growth is actually 18%. Total business of the bank grew by 14% to Rs. 230,185 crores. Net interest margin for the quarter was 3.23%. With this, we have clawed back the bit in net interest margin that occurred as a consequence of the repo rate cuts. The net interest margin for the quarter was up sequentially 28 basis points, and on a YOY basis, the NIM was up 20 basis points. The bank was able to show a healthy growth in average advances during the period with a growth of 17%. Return on assets at 105 basis points and return on equity at 12.84%. Bank declared the highest ever net interest income in the quarter at 1,025 crores, which is a growth of 23%, compared to 832 crores registered during Q1 FY25-26. It also represents a sequential growth of 110 crores between Q4 and Q1. Capital adequacy ratio for the bank was at 19.62%, and the Tier 1 ratio stands at 18.93%, as on June 30, 2026. CASA grew by 15% year-on-year to 41,496 crores versus the earlier year period amount of 36,204 crores. Provision Coverage Ratio Including write-off improved by 569 basis points to reach 54.91% and PCR-excluding write-off improved to 81.40% during the year. Overall, gross NPA reduced by 177

basis points from 3.15% to

1.38% on a YOY basis. Net NPA reduced by 42 basis points from 68 basis points to 26 basis points, again on a YOY basis. Slippage ratio for the quarter was at 12 basis points, which, when annualized, comes to 48 basis points. The credit cost for the bank for this quarter was 9 basis points. I'd like to now take you through some other operational financial performance indicators of the bank. Our focus on MSM in loans continues. On a YOY basis, our business loans improved from 14,391 crores. Sorry, they improved to 14,391 crores. From 12,660 crores, this number includes a 554 crore charge-off. If we were to exclude the impact of this, that amounts to a growth of 18% on a YOY basis. The gold loan business grew by 43% and now stands at 24,930 crores with an average LTV of 65.25% and an average ticket size of 2.94 lakhs. Mortgage loans, home loans, and auto loans are other areas of focus. On a YOY basis, we were able to achieve 34% growth in mortgage loans, 19% growth in home loans, and 34% growth in auto loans. And these numbers exclude the impact of IBPC stroke BA or other bulk transactions that we may have entered into. We will continue to maintain the momentum in disbursements and collections in the coming quarters, and we aim to achieve the desired targets that we set out for ourselves. As many of you know, this is the last conference call that I will be attending in my current capacity as the Managing Director and CEO of South Indian Bank. So before I conclude and open the floor for questions, I'd like to thank all the folks on this call for working together with us as we've built, you know, the franchise for South Indian Bank over the last two years and nine months. During this period, we've made a very significant process, I mean, very significant progress. In terms of new products, changes to existing products, new systems so that we are able to do business better with our counterparties, significant improvements to our processes, changes to our organizational structure, significant enhancement in our capabilities that enable us to compete better. And all of this was possible because, A, I was given this opportunity to be part of this organization, for which I thank the board and the others who were responsible for it. And I'd also like to thank all my colleagues within South Indian Bank, who have afforded me the trust. And collaborated with me in making possible whatever progress that we've had over the last two years and nine months. I'd also like to thank all of you on this call for your forbearance, for your advice, for your help in transitioning South Indian Bank. Thank you very much once again.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Akshar Agarwal with Nirmal Phang Institutional Equities. Please go ahead.

Good evening, sir. Thanks for the opportunity. Sir, if you can provide some color on what drove such a sharp decline in cost of deposits. Have we absorbed all residual deposit repricing or is some left? And how much contribution was from the very strong growth in CASA during this quarter? And similarly, on the asset side, what grew up the better yield on advances? Was it a shift towards the better yielding retail as MSME and MidCorp, or was there something else? And overall, sir, what's the outlook for the margin going forward? That was my first question, sir. Thank you.

Thank you, Akshet. I think basically we've been working on our cost for a while, and a substantial chunk of our liability base – sorry, we are getting some kind of background noise from somewhere.

Yeah, it's been managed. Please go ahead.

Okay. So, there was a... As you are all aware, the interest rate cycle changed when RBI started cutting repo rates, at which point in time we started, you know, marking down our deposit rates as well. And during the period from the first quarter and the second quarter of this year, So, I'm saying from January of this year to June of this year, a very substantial portion of our high-rate deposits actually rolled off and repriced downwards by anywhere between 40 to 60 basis points. And that, in large measure, is what is reflected in the significant reduction in our cost of funding. There's also a very significant impact that is coming from the increased CASA balances that we have. The good news is that our average CASA balances grew 19%. So they went from 100% to 119%. And that in turn has helped manage our cost of funding. And the final element that helped us manage our costs It was the fact that our bulk deposits rolled off. So we basically dropped bulk deposits by 50% from where they were a year ago. And if you are overfunded, then you end up paying X on the deposit and then receiving Y when you place the money overnight with Reserve Bank of India. So the arbitrage losses that we were suffering was reduced very considerably. So there was a lot of active management on the funding side that enabled us to do all of this. But the principal reason is the fact that the higher cost deposits rolled off. Now, your question was, will it continue, you know, going forward? I suspect that a substantial portion of the repricing impact is already baked in. Going forward, there may be, you know, this kind of sharp reduction is quite unlikely. And the second part of your question was, how did we get the five basis points increase in our acid yields? That was largely driven by a shift in mix. And we were also helped by the fact that a portion of our corporate book is linked to T-bills, and T-bills moved up very sharply during this period. So, there was a mixture of various things that happened, change in mix, us being on the right side of the rate cycle movement, all of that helped to get the yield on assets up. So, I hope this answers your question. If there is, Nim, do you want the guidance? So, from a right side, yeah. So, with respect to NIM guidance, what I would like to say is that when the rates were going down, we were perhaps the most impacted bank because we gave effect to a repo rate change on a T plus one basis. So, if rates go down, we are the most impacted, and the logic for us to adopt that was, A, you know, it's in line with RBI's policy of date transmission and so on and so forth. But equally importantly, if you are the first one to be impacted, you're also likely to be the first one to take the action to counter the impact of the change. And so now we are in a position where our belief is the rate cycle has switched, so it's more likely to increase than to reduce. And if that belief is right, then our view is that the NIMS from here should harden as the repo rate changes come into effect. So, while I cannot give a guidance on the number, all I can say is that we are reasonably well positioned with respect to NIM. And we do expect that the outcomes for us during the year will be positive.

Thanks for the detailed answer. My second question is on OPEX. The bank has resumed employee hiring and branch expansion this quarter. Do we expect further hiring and branch addition for the rest of the year, and how should we think about the cost going forward?

Oh, it's a very good question. We are in a very small way, you know, restarting branch rollout. Essentially because we had frozen almost everything for the last three years. So, in fact, we had reduced our branch count by a little bit, and we are now coming back to where we were. The branch rollout this time is going to be in very key locations for us. We think that we are going to make better choices in terms of where to put the branches and our whole process of managing the branch rollout in such a fashion that we get outcomes that we want, which is revenues to come reasonably quickly after the expenses crystallize. It's something that we are working on. So the idea is to be very, very careful as to where we put the branches and how we get them to actually be accretive to ourselves. So at this point in time, there is no significant change in our process. We think that we should be able to manage our costs quite tightly going forward. As an institution, we are aiming to get operating leverage, positive operating leverage. So the last two years, we've demonstrated positive operating leverage. This quarter, we don't have it. But for the full year, our aim is to get full positive operating leverage. And I think the traction that we have on NIMS, the traction that we have on business lines in general, Gives us some confidence that while the costs will increase a little bit, our total revenues will increase more, and consequently, pre-provisioning operating profit should actually increase. I'm going to request our CFO, Vinod Francis, to give you further details, if you so desire.

According to the points what Andy Cheshavri has mentioned, so by and large, we are not expecting that any significant increase in the OPEX that will come in the current year to materially alter the BRD structure. So we should be within the range of say maybe 5-6% in that range.

My last question is on fees, sir. It has been a little bit soft, declining QOQ, and even other income, which includes the bank assurance and recoveries, were on the lower side. So, what would be the outlook for the rest of the year? Can we expect fee recovery this year, or is it more of like a FY20-AT agenda? And within others, how did bank art end it versus the recovery, sir?

What are the last questions versus recovery? I'm sorry, I couldn't hear you.

Yeah, so there's an other part of the non-interest income where we put bank insurance as well as the recovery income. So I wanted to understand what's like, how both are trending, as in is bank insurance income increasing and recovery is coming down, is something like that happening over there?

So, to answer your question, Firstly, we think that this is a one-off. We were very busy working on our NIMS, and we were not laser-focused on fees. So we will renew our focus on this element, and we do not see this as a trend. I think we should be able to address this going forward. We are also working on a series of new systems which will enable us to participate in other products more effectively. So, our trade and FX platform, we are hoping will go live by end of September with all capabilities. So, it will enable our customers to do everything electronically with us. You know, FX bookings. LCs, guarantees, the ability to send money overseas, receive money from overseas, everything being done electronically, settling the export bills, import bills, all of that. So, currently, on the FX side, we have limited revenues, but you can see from our presentation that our revenues, whilst they are limited, have been growing at 40-50% year on year. So, with these new systems coming in place, business volumes will grow and revenues will also grow. So, with respect to fees, my own view is that it's a one-timer. We shouldn't read this as something that is going to last forever. It is something that we can work out of. It is perhaps because we were focused on other elements and we did not focus on this as much as we should have. The second question was, how much was the first quarter of any financial year is a traditionally a softer year, a softer quarter when it comes to recoveries. So our recoveries for the quarter was approximately 170 crores, 179 crores in reality. And our slippages were 120-odd crores, 128 crores. So, the difference between slippage and recoveries... It was lower than normal, and a small proportion of that comes in as revenue, into the revenue line, which should have been significantly lower than the numbers that we've had historically. But to give you the exact number, I'll request Vinod Francis to walk you through the numbers.

With regard to the recovery side, if you see, we have the recovery from technical difficulties also, 60 goals, and that remains with the last quarter, that is, March quarter, but on the other side, the contribution of the recovery towards the interest income is slightly lower, and because of the total recoveries are slightly lower when compared with the March quarter, because this quarter, we had a total recovery of 179 goals.

Right, sir. Sir, thanks a lot for answering my questions. I will rejoin the queue. All the best.

Thank you. Next question comes from the line of Prashant Kumar with Suniti Securities and Finance. Please go ahead.

Thanks for the opportunity. So, first of all, congratulations, sir, on a remarkable tenure of South Indian Bank, and under your leadership, the bank has delivered a significant turnaround, and we wish you all the very best for your future endeavour. My first question is on corporate credit, I mean, asset side, and corporate credit has grown at a healthy pace over the past few quarters. And with a corporate portfolio now accounting for around 40% of total loan growth, but our strategic objective was to reducing around 30%. So, I'm the man from here to...

Good question. Our aim in the long run is to bring But under the current circumstances, given the disturbances in West Asia and so on and so forth, our belief is that high-quality corporates offer lower risk than some of the other segments we operate in. And the other thing that had happened was pricing on corporates had improved very dramatically during the last quarter, especially for the shorter duration facilities. So we took advantage of that. Because we already had credit lines on many large corporates. And given the fact that we had liquidity, we chose to deploy it with the corporates because the view was that in an environment which is uncertain, deploying money which is marginally accretive with low-risk counterparties was better than trying to grow high-risk assets. And that's why corporate grew last quarter. The environment hasn't changed very dramatically. The uncertainty associated with the Persian Gulf continues. So our view now is that we will continue to look for opportunities on the corporate side. As long as they are remunerative, we will engage with them. But long run, those balances will be wound down. Please remember that these are all very short-duration assets. And we have the ability to wind them down accurately at will. I mean, it's not really at will, but they have short duration, so they roll off very quickly. And therefore, this is a one-time adjustment, which has occurred on account of environmental conditions, and also given the strengths that we have on the corporate side. I mean, if we did not have lines on these same counterparties, we would not have been able to grow this. But given the fact that we had them, and we had the liquidity, and we were a little wary about credit risk that is likely to hit us in the future, we took this opportunity. I trust I answer your question.

Thank you. Mr. Kumar, please rejoin the queue for more questions. Next question comes from the line of Suraj Das with Sundar Mutual Funds. Please go ahead.

Yeah, thanks for the opportunity. I have three questions, but because it's the one clarification...

Mr. Das, sorry for interrupting. We cannot hear you. Can you speak a little louder?

Is it better now?

No, can you speak a little more louder?

Okay, is it better now?

Yes, please, Khabar. Thank you. Okay, sure.

So, I was saying thanks, sir, for the opportunity. I have three questions, but before that, one clarification. On this fee income that you were mentioning, there was some one-off, but if I look at your core fee income line item, which is 179 crore this quarter, if I look at this trend in terms of, let us say, ROA contribution, The contribution seems to be coming down only, let us say, from 60 basis points to now 50 basis points for last two, three quarters consistently. So if you can highlight what are the factors behind this weakness, I mean, is this that the new products that you are doing, you are more focused on, let us say, margin or yield rather than the fee component. So the new products that you are doing are of lesser fee component. Is that the strength? So that is question one. Question two, sir, in terms of employee cost, I think there are some one-off in the last quarter in terms of actuarial thing of 80 crore. It looks like that this quarter piece has reversed fully, while the G-set movement has been half of only the movement in 4Q. So planning clarify that thing. The last two questions there are, one on the credit cost. So right now, I think on a run rate basis, you are 30-35 basis point. After ECL, do you think this could be the run rate or it can go up? Because eventually there is a higher requirement on the SMA, 1 plus 2. And so the last question is on FCNR bid deposit growth. So this quarter it has been good, I think 6% QO2 growth. Question is there, do you still see this kind of growth post-June as well? Because I think there are a lot of noises in terms of this leverage thing, talks within RDI and UAE Central Bank, so and so forth. So, are you seeing that both women's food or it has come down or if you can give some color and also what is the landed cost of these deposits?

Okay, those are a lot of questions. So, let me answer the first one first, your question on fees. P, basically multiple lines. One line, which is treasury and forex, has been very, very muted for us, as you can see. So, it was very good in Q1, FY26, but now it is Q4, FY26, it was actually zero. Now, we have recovered a little bit. We have 44 cores, but it is 80% below what it was in Q1. Now, with respect to the core fee income, You are right in the sense that it has come off a little bit from 191 crores in Q4 down to 179, and it's a little lower than Q1 of FI26, which is 188. And there are some technical reasons for it. We seem to have changed some product setups on our system, where when an account is renewed... So, you know, the way we renew it and the way we charge the fee by way of an oversight or by way of a change in the process, it helped, you know, unfortunately resulted in lower fees being charged for a particular product. So, that difference between 191 and 179 can in large part be... We sort of attributed to that, which we will now fix going forward, and we should be able to change the mix. And the other area where we have a reduction is in terms of recoveries, a portion of which gets attributed to interest income because of the nature of the loan and where it is and the quantum of recoveries that we get. So, as I told you, Q1 is lower than Q4 of last year, and it tends to improve as time goes along. And therefore, my view is that this, you know, lower non-interest income line is an aberration which will get fixed as we move forward. So, we are aware of it, we are addressing it, and our belief is that this is something that we will be able to fix as we go forward. The credit cost guidance, from a credit cost perspective, our cost was 9 basis points for the year, for the quarter. Slippage was 12 basis points for the quarter. Slippage was 128 crores. We think that our slippage will be in the neighborhood of... So, 500 to 750, 800 crores will be the, you know, slippage given the current trend lines that we can see, even assuming that there is some deterioration on account of the West Asia problem, and our recoveries will be in the neighborhood of 800 to 1000 crores. So that's the current view that we have. Obviously, we'll try and restrict the slippage to the... maximum possible. The exact credit cost that translates into our P&L is a factor of many, is a function of many, many things that go into it. We think that the nine basis points that we currently have is probably, you know, on a generous side. So hopefully as we go forward. Our credit costs will moderate from here, if anything, but I'll turn this over to our CFO for a more detailed answer.

Thank you, sir. With regard to the other income, just to touch upon one more thing, in addition to what he was mentioning. So, as you know, there is a limit of one-off items compared with the last year.

Sorry for interrupting, speaker. Speaker, can you speak a little louder? Cannot hear you.

Am I audible now? Am I audible now?

Yes, please go ahead. Thank you.

So just to add a few points on the other income side, apart from what Andy was mentioning, so it is with regard to the, if you compare with the figures of 2-1 of the last year, there are certain one-off items you can see over there. That is one which MBS already mentioned with regard to the treasury. Last year, we had a spectacular income from the treasury. And apart from that, there were, say, the income what we earned from sale of BSLC was there. So, there was a most close to around 60 groups. So, currently, we were not having that kind of surplus to have that sale. So, that is also if one of the items which is not there as a one-off, it comes. And covering from the Technique EuroTrop accounts, we are almost flat compared to the last quarter. Last quarter, it was 60 crores. So, it remains almost flat even though total deliveries have reduced from... The total recovery is in 179 groups. But going forward, historically, if you see the recovery pattern, the Q1 seems to be a little bit slower. And thereafter, more and more recoveries should come in the coming quarters. And hopefully, you should be able to post to around 1,000 groups for that year.

Thank you. Okay.

And on the actuarial thing on the OPEX? Yeah.

So the actuarial valuation, as we mentioned, last quarter, we had a writeback of around 80 crores. So, this quarter, as you know, at the year beginning, we take the actual valuation as a projection for the current year, and based on that, we started providing as normal. So, last year also, first quarter, if you see, we had a total actual contribution of around 84, and this year also, we had made a contribution of 84. So, it is back to the normal.

Oh, okay, sure. And the last one, the FCNR, I think, is the growth good even after June?

The growth has been robust, and we are participating actively on the FCNR scheme. We have, internally, our view is that as long as the price matches the price of liquidity within the country in Indian rupee terms, we will price it at that level. So, we are offering very attractive rates to our customers, and we are seeing flows. We believe that a vast amount of these flows will come in August and September, because the offer is open till September 30th. So, we are working with our rep office in Dubai. The Dubai rep office, what it can do and what it cannot do. It has been an area of some focus with the central bank of the UAE, and we are engaging with them to ensure that we operate to the maximum extent possible and permissible under the law. And one area where we do have a concern is that we don't have credit lines from external entities and more do we have a... An entity, gift city. So, consequently, offering leverage for us is not possible, and therefore, by definition, the customers who are at this point in time are placing deposits with us are those who are placing unlevered deposits. We are working with foreign banks to get ourselves lines, but those have not materialized as of this moment. So, if they do happen, then our volumes will materially change, but right now the pace of growth is good, and we are quite confident that we will get reasonable numbers.

Thank you, sir. Thank you very much, sir.

Thank you. Next question comes from the line of Part Kutka with 361 Capital. Please go ahead.

Yeah. Hi, sir. Thanks a lot for the opportunity.

Sir, I think security receipts, you know, have gone down on a QOQ basis.

And we would have recorded some, you know, income on the same. So what was the quantum?

I'll request our CFO to answer that question. Security receipts, we've got some 40-odd crores of cash. Yeah.

So, security receipts, in the beginning of the year, we had a balance of 190 crores, and we closed the portal with a balance of 72 crores. So, there was a recovery of crores to 47.

Yeah, right, sir, but then we would have recognized it from some portion of it in the PNL.

No, we don't have anything upside on that with the PNL side. It's only the recovery of the principle.

So the upside was recognized when we recognized the SR itself. The entire SR was recognized as an upside.

Okay, okay. Fair enough, sir. And my second question was, you know, if I look at a QoQ growth within the gold loan book, it's just around 0.8% on a QoQ basis. So what has actually happened in this quarter?

So, there was a change in our process and policies, occasioned by the fact that the RBI had come out with a circular on gold loans, which went into effect on the 1st of April. And as a consequence, some of our other arrangements, which is basically where we were doing some co-lending and where we had some portfolio purchases and so on and so forth, those ran off to the extent of almost 270 crores or so. Our branch banking by itself grew quite nicely. But because of the runoff on our bulk deals, the net growth was only the number that you are talking about, which is roughly 80 basis points. But underlying poor growth from our branches is quite solid. And we are reasonably confident that, you know, going forward, you will see material growth on the gold loan business.

Okay. And, sir, my last question, SMA 1 and 2 both has gone up on a QOQ basis by W80 crore. Anything to read into it?

SMA 1 and 2 always increases in the first quarter from the fourth quarter. There is a seasonality in it. And you can see it in the prior years also. So, if you see March 24 versus June 24, you will see that it goes up. And if you see March 25 versus June 25 also, you'll see the same trend line. Nothing, as of this moment, we don't see anything, any, sorry? As of this moment, we have, you know, we don't see anything material in the changes, and we have reviewed these numbers, we have seen the constituents of SMA 1 and 2, and we believe that they are reversible, and that they do not materially add to the risk that they are carrying.

Thank you. Thank you, sir. Thanks a lot for answering my question.

Thank you. Next question comes from the line of Jai Mundra from ICICI Securities. Please go ahead.

Hi, good evening, sir. Sir, a few questions. Sir, first is, you know, ECL will also change the effective interest rate regime, right? Have you done any working? Will this change the NII in any manner or will it or it is too early to say or, you know, it does not change anything materially?

You want to answer that, you know?

So, Jay, good afternoon. So, with regard to the effective industry coming in as a part of ECM, we don't expect that there will be any material change. Of course, there is working is still on. We are not in a position to give a concrete number, but in initial workings reflect that there will not be any material change to what we have currently.

Right. Thank you. And secondly, sir, this DICG's insurance, there was, you know, now the banks are, the insurance repricing is not uniform. And does this change any outgo for insurance or this is status quo or was there any benefit, if you can highlight that?

Yeah. So, we also got benefited by that change. So, if you have seen the numbers on pro2 basis, there is a reduction of pro2 around 10 pro2 over there.

Sorry, reduction in percentage, it will be like 15% type reduction, right, for full year. Is that the right understanding? Because that is a... Okay, sure. So, that is good. And lastly, sorry, second lastly, one, sir, you know, if you have any breakup for this other income breakup into PSL, TW, recovery, and maybe FLDG, and, you know, third party or something, just to understand the movement better of the non-core, non-treasury fees.

Okay. So, broadly, as I already mentioned, this quarter, we don't have any income on the PSL. Second thing, FLEG also currently, we don't have any FLEG income on any of the product. So, by and large, we don't have any one-off income in the other side for the current court, compared to the last year or last court.

Okay. And TWA recovery was around 60 crores, right?

Which is what you said. Okay.

Sure. And just a small clarification, but I think you mentioned that because despite there is a lot of, I mean, this quarter had a chunky disbursement in corporate, but still the yield were favorable. That is part of that is because of the T-wheel movement, right? Or within corporate, you think you have scope to improve the yield for the spread?

So, it is a bit of both, Jay. I mean, some of it was steeple movement and some of it is the market hardening. I mean, liquidity was a little tighter and therefore we took advantage of it and pricing to corporates went up. Otherwise, we wouldn't have grown the corporate book. So, it was opportunistic. It was opportunistic. It was available. Pricing was better. And on the retail side, prices were not moving upwards, whereas on the corporate, they were moving upwards quite considerably, and we took advantage of that.

Thank you, sir. And just a small parting message. I mean, you have been there for the three years and you have helped us a lot in understanding and explaining the bank. Wish you all the very best for your next inning. Thank you, sir. Thank you very much.

Thank you. The next question comes from the line of Rohit Ahuja, Lotus Lion Venture. Please go ahead.

Hi, sir. Thanks for the opportunity. With, you know, CR at 19.6% and legacy book cleaned up, what's the three-year plan for deploying excess capital?

And where do we see ROEs sustaining on a steady state list?

So, the plan for deploying excess capital very clearly is to grow the balance sheet, you know, at wherever the market is growing plus

2%, a couple of percent above where the market is growing,

and also to change the asset mix a little bit. So our CRAR is also helped by the fact that we have... A large concentration of very low-risk assets, where the capital charge is very low, but they also have the problem of being lower yielding. So, as we move up the capital charge ladder, automatically the spreads also improve for us. So, some of it will get utilized as we originate more retail. MSME business, which is not necessarily rated AAA, where the capital charge will be closer to 100% to 150%, you know, and that will, you know, the risk density will increase as we start increasing all of this. So, to answer your question very simply, our balance sheet will grow. The constituents of the balance sheet will change, and the CRAR computation will change accordingly, and capital will get used because the asset structure has changed.

Any guidance on ROEs?

You know, we've been saying that we have a few levers for our financials, to manage our financials. We have a... We have the ability to change the structure of our balance sheet on the asset side while keeping a tight lid on our costs. So if you see our cost of money today, we believe that we are amongst the better-placed institutions in our peer set. Obviously, we can't compete with the State Bank of India or any such other institution, but amongst our peers, we have arguably amongst the better cost of money. So, therefore, our aim has been to grow our balance sheet at a rate at which we can continue to keep this advantage, Whereas on the asset side, we try and... You know, move away from the lower-yielding assets and move it into the higher-yielding assets. So, I think as we do that, our return on assets will improve from where we are today. You know, we had said that we'd be in the 100 to 110, 115 range. Over time, that should sort of migrate to 120, 125. And given our leverage, you can compute the return on equity automatically. So, that's the trend line that we see. As of this moment, I'm hesitant to give you a more concrete answer, considering that I'm nearing the end of my tenor, and therefore, it would be inappropriate for me to proffer something which binds my successor.

Sure, sir. Thanks for that. All the best for your next journey.

Thank you.

Thank you. Next question comes from the line of Ravinder, an Indonesian master. Please go ahead.

Mr. Ravindra, please go back. Hello, am I audible?

Yes, please go back.

Yeah, my question is to Mr. Riyas Feshadri. Thank you, sir, for serving CES and all the best for your nothingness. But my only question is, why don't South Indian Bank is having a leadership stability? Because previously, Mr. Ravindra, more he also left in three years.

Mr. Ravinder, thank you very much for the question. I cannot really answer for Mr. Murali's decisions. I can only say that I was initially also, in my mind, I did not see this. I am leaving as a consequence of the fact that I believe that I want to do other things with my time. And considering my age, I believe that there comes a point in time when you have to lay down some of these roles and move into others. And that's the reason why I'm moving on. I can't really address the actions taken by others.

Okay, sir, and my next question is on the next interest income. So, this quarter, it has grown very nicely. Is it sustainable in the coming quarters as well? Will this run rate go on?

I'll request our CFO to address that question.

Yeah, thank you, second term. So, If you see the growth in the net interest income for the current quarter, as we already mentioned in the call, we had a couple of advantages which we derived from the repricing of bulk of deposits. So, and apart from that, another strategy what we implemented is that to reduce the bulk deposit by almost 50%. So, this advantage what we got from the repricing of deposits may not be in the same quarter in the coming quarters. So, of course, we continue to ensure that the net interest income holds. And at the same time, another delivery that can come in favor of the bank is that, as we mentioned in the call, that in case if the interest rate cycle moves up and the repo rate increases, definitely that also will work in favor of the bank as we pass on this repo change on P plus one basis to the customers. So, that is also expected to be in favor of the bank over the years.

All right, sir. Thank you very much. Bless my Lord.

Thank you. Next question comes from the line of Aman from ICC Securities. Please go ahead.

Hi, sir. Thank you for the opportunity. Can you spell out the loan outstanding for retail as a whole segment and retail gold?

Aman, I think I'll request my team to give you the numbers. It's not available with me right away, but we can give you the numbers. Those are available in general.

Sure, sir. And I'll request you or Dolphy, sir, can speak about the prospect of MSME growth, MSME segment loan growth.

I'll request Dolphy to walk you through that.

And, Ms. Amy, yes, there has been, the growth has been a little muted from our expectation. We were actually well poised for this quarter, last quarter for scale. Unfortunately, there was too many uncertainties, which probably gave us a caution to go a little slow. But having said that... The fraternity has reacted as business as usual, and that's giving us some confidence to make sure that this quarter, we will go back to the scale mode, and we intend to keep our narrative impact on changing the balance sheet mix from shrinking the corporate and increasing our contribution to the advanced book from better yielding assets, specifically MSME. That narration continues. So, I can only reassure you that we are on the narrative in the right direction.

And, sir, what would be disbursement under the ECLGA scheme?

We have a limit set of about 400 crores as of date. And a disbursement of about 238 crores, exactly. But the utilization is there on the list. I think we have a book of utilized book of about 50-odd crores. So that is yet to fortify, but we are on it. So I think we're looking at progressively increasing that ECLJ's contribution to the book.

Got it, sir. And just the last question, if you can give me break-up of upgrade, recoveries, and write-offs during the quarter, if that is readily available.

I'll request Vinod and Rashaan to review the numbers.

Sure.

Amen, with regard to the recovery side, the total recoveries for the current quarter was 179 crores. And out of that, the technical right of, or recovery from technical right of account is close to around 60 crores. And interest on NPA that contributes to the net interest income as a part of recovery that is close to around 40 crores.

Got it, sir. Thank you.

Thank you. On behalf of South Indian Bank, that concludes this conference. Thank you for joining us. You may now disconnect your notes.