South Indian Bank investors fear roadblock in Vision 2025 program as MD refuses re-appointment

The bank’s Vision 2025 program entails crossing 13 percent in return on equity (RoE) and 1 percent return on assets (RoA)

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Shares of South Indian Bank tumbled over 14 percent on March 29, a day after Managing Director and CEO Murali Ramakrishnan opted out of re-appointment due to personal reasons/family circumstances. His tenure ends on September 30, 2023.

At 11 am, the stock was quoting at Rs 14.15 on the NSE, lower by 14.5 percent. Trading volumes were significantly high at 93 million shares. The stock had rallied from Rs 8 in August 2022 to Rs 21 in December 2022.

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Ramakrishnan was appointed as the South India Bank‘s top boss in 2020, in the middle of the pandemic. Due to COVID woes, the bank’s gross non-performing assets (GNPA) and net non-performing assets (NNPA) had spiked to 8.02 percent and 5.05 percent, respectively.

However, under Ramakrishnan leadership, asset quality improved and GNPA and NNPA stood at 5.48 percent and 2.26 percent, respectively as of December end. Net interest margin has also improved to 3.52 percent in Q3 FY23 from 2.64 percent in Q3 FY22.

The bank’s credit growth has also accelerated driven largely by corporate segment, noted ICICI Securities. The corporate segment’s share increased to 32 percent in Q3 FY23 from 26 percent in the year ago period.

The bank’s Vision 2025 program entails crossing 13 percent in return on equity (RoE) and 1 percent return on assets (RoA). Currently, the bank’s annualised RoE stands at 9.22 percent and RoA of 0.56 percent.

“Post the onboarding of new MD in September 2020, the bank continues to deliver in line with its Vision 2025 programme. It is focused on growing the balance sheet in a calibrated manner with emphasis on NIMs and asset quality,” said ICICI Securities post Q3 results.

Now, with the MD refusing re-appointment, the Street fears that the trend might not continue, said market observers.

Meanwhile, Ramakrishnan told CNBC-TV18 that the bank has already appointed an agency to start searching for next candidate “internally and externally as well”.