Financial Daily from THE HINDU group of publications
Saturday, Oct 29, 2005
Financial Daily from THE HINDU group of publications Saturday, Oct 29, 2005 |
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Money & Banking
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Private Banks South Indian Bank sheds Rs 600-cr high-cost deposits M. Ramesh
Chennai , Oct. 28 SOUTH Indian Bank has reduced its high-cost deposits by Rs 600 crore and raised Rs 150 crore of low-cost deposits, the bank's Chairman, Dr V.A. Joseph, told Business Line recently. While the effect of this on the margins is yet to be calculated, the bank's net interest margin has increased to 2.98 per cent at the end of September, from 2.74 per cent at the end of the last fiscal. The bank, which is preparing to come out with a public issue to raise Rs 150 crore, is well insulated against interest rate hikes, Dr Joseph said. Seventy-six per cent of its investment portfolio of Rs 2,492 crore is in `held- to-maturity' category, where the average yield is 7.56 per cent. The average yield on the entire investment book is 7.27 per cent, against the overall cost of funds of 4.86 per cent. The bank has Rs 82 crore in its `Investment Fluctuation Reserve' (IFR) account, which works out to 14 per cent of investments in the `available-for-sale' category - substantially higher than the regulatory requirement of five per cent. The Reserve Bank of India has now allowed the balance in IFR to be treated as Tier-I capital. Since Tier-II capital can be up to 50 per cent of Tier-I, South Indian Bank has further headroom to raise Rs 41 crore under Tier-II. Recently, the bank raised Rs 65 crore of Tier-II capital, which has increased its capital adequacy ratio to 10.3 per cent. The public issue will take it past the 12 per cent mark. It will also result in reducing the holding of ICICI Bank to around seven per cent from 11 per cent now. The bank's advances book of Rs 5,717 crore yields 8.89 per cent on the average. Net addition to advances in the first half of the current fiscal stood at Rs 352 crore. Dr Joseph said that the bank had targeted a turnover of Rs 25,000 crore and net worth of Rs 1,000 crore by March 2008.
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