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Analyst Meet / AGM - Analyst Meet

Plans to cut GNPA to 2.25% improve NIM to 2.8% by end March 2015

Syndicate Bank

01-Aug-2014, 06:42
Syndicate Bank conducted the analyst meet on 01 August 2014 to discuss the financial performance of bank for the quarter ended June 2014 and the prospects of the bank. SK Jain, CMD and along with other colleagues addressed the meet:
Highlights:

Bank expects overall banking credit growth to improve in Q3 and Q4FY2015 with impact of various initiatives announced by the government.
Bank observes NPA levels to have peaked and expect the asset quality to improve going forward.
During Q1FY2015, the Net Interest Income of the bank was nearly flat as the NIM narrowed sharply to 2.47% in Q1FY2015 from 2.83% in Q1FY2014.
Surge in fresh slippages of advances to Rs 1500 crore in Q1FY2015 and resultant interest income reversal of Rs 135 crore mainly impacted the NIM. Further, the cost of deposits also increased weighing up on margins.
Bank proposes to reduce the cost of deposits by further reducing the share of bulk deposits and improving the CASA ratio to 31% by end March 2015.
Bank proposes to improve the NIM to 2.8% by end March 2015.
Along with high fresh slippages of advances, the recovery of 3-4 big accounts could not materialize contributing to increase in NPA in Q1FY2015.
As per the bank, about 75% of fresh slippages were below Rs 1 crore. There was only one account with exposure of above Rs 50 crore at Rs 132 crore slipping to NPA category in Q1FY2015.
Among the fresh slippages, agri segments contributed about Rs 250 crore of fresh slippages. As per the bank, these accounts may be upgraded in August 2014.
Bank proposes to reduce the GNPA to below 2.6% by end September 2014 and to 2.25% by end March 2015. Bank also intends to raise provision coverage ratio back to 70%.
Fresh restructuring of advances was mere Rs 222 crore in Q1FY2015. Bank has restructuring pipeline of Rs 400-500 crore for Q2FY2015.
Bank sold about Rs 1000 crore asset to Asset Reconstruction Companies (ARCs) in Q1FY2015. Bank also had board approval for further sales of Rs 1500 crore asset to ARCs.
Bank expects to achieve the Priority Sector Lending (PSL) target of 40% by end March 2015.
In the overseas operations, bank expects to improve the share of customer credit to 40% of overseas advances by end March 2015. Bank is set to complete full deployment US$ 400 million of MTN shortly.
Thus, bank expects the overseas NIM to improve to 0.45-0.5% in FY2015.
Bank does not have capital infusion requirement in FY2015. However, the bank as requested to the government to allow reduce government holding to 62% from existing 67%. This would help bank to raise Rs 1200-1300 crore.
Banks board has also approved the issuance of perpetual bonds and Tier II bonds.
However, the bank would raise capital at appropriate time.
Regarding the infrastructure bonds, bank has assessed its issuance need at Rs 4000 crore. However, the bank would wait for interest rate to ease before issuance of infra bonds. Bank would interest in immediately issuing infra bonds, if allowed at floating rates.
Bank expects tax rate at 17-18 for FY2015.