South Indian Bank Should be Beware of Quality of Customer Service

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South Indian Bank Should be Beware of Quality of Customer Service

South Indian Bank Should be Beware of Quality of Customer Service
South Indian Bank Should be Beware of Quality of Customer Service | Source

South Indian Bank Should be Beware of Quality of Customer Service

15 branches on a single day

South Indian Bank has produced good results for the quarter ended 30.09.11 as compared to the quarter ended 30.06.11. Both revenue and net profit have increased. The shares of South Indian Bank are traded in the Indian stock markets at Rs.20.55 now (BSE 23.12.11). The shares are available in both BSE and NSE. South Indian Bank has set a business target of Rupees one lakh crore turnover by the year 2014. On a single day, South Indian Bank opened 27 branches – 15 of them in and around the twin cities of Secunderabad and Hyderabad. V A Joseph is the Managing Director and CEO of the bank. The bank is a Kerala-based bank. The bank has 674 branches now. Amitabha Guha is the Chairman of the bank.

Accent on corporate banking

South Indian Bank is eyeing 50% growth in fee income over the next two to three years to further augment its net profit. For achieving this, the bank plans to step up its corporate banking operations. Six dedicated corporate banking facilities will be set up in major cities New Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore. But even without this, the bank was able to improve on its net interest margin in the September quarter results. The bank also plans to boost its fee income by selling gold coins and third party insurance policies.

Customer service may suffer

But the bank will have shortage of employees as around 1000 employees are set to retire this year. Even though the bank’s staff expenses will reduce even if it fills the vacancies with junior employees because of the difference in scale of pay, the bank will find it difficult to replace talent. For the next two to three years, the bank may be suffering because of overload on the existing employees. The quality of customer service may deteriorate which the bank should take care of. If enough care is not taken, the brand image of the bank is likely to suffer.

NPSs under control

South Indian Bank has managed to keep its gross and net NPAs under 1% of the total loans. This is a commendable achievement. While the public sector banks need not have to bother about their NPA level because of the government capitalising them, private sector banks like South Indian Bank will have to take care of their advance portfolio. The total business of the bank has increased by 30.8% to Rs.56386 crore during the quarter. The bank’s net interest margin is at a respectable 3%.

QIP postponed as market is sluggish

South Indian Bank decided to postpone its Qualified Institutional Placement (QIP) for Rs.1000 crore as investors are not ready to pay the price the bank demands in this sluggish market. South Indian Bank has launched branded gold coins and bars. The bank plans to add over 60 branches to its network in the current fiscal year. South Indian Bank has also plans to start a NBFC (Non Banking Finance Company) as a fully owned subsidiary.

Invest for medium and long term

At the current market price, investors can buy the shares of South Indian Bank for medium and long term investment for decent gains. Short term profits are also possible if the stock market starts rising.


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