Syndicate Bank narrows losses in Q1; asset quality remains stable

The public sector lender is confident of posting Rs 500 cr net profit in FY20

Public sector lender Syndicate Bank on Wednesday reported narrowing of its losses at Rs 980 crore for the first quarter of ongoing fiscal year owing to improvement in asset quality, apart from sound recovery. 

The bank had reported a net loss of Rs 1,282 crore in the first quarter of previous fiscal and net profit of Rs 128 crore in the preceding quarter.

Total income of the bank stood at Rs 6,080.7 crore in the April-June period of this fiscal, a rise of around 8 per cent on year-on-year basis.

"In Q1, we have increased our provision coverage ratio to ring fence the balance sheet from any future shocks. That's the reason that we have reported losses in the quarter. Otherwise, our asset quality remained stable with signs of marginal improvement," said Mrutyunjay Mahapatra, CEO & MD at Syndicate Bank said.

In the last quarter, provision coverage ratio of the bank jumped to 69 per cent from 63 per cent reported a year ago as it provided an additional Rs 1,200 crore towards provisions over the preceding quarter. 

In the June quarter, while net interest income of the bank increased 19 per cent YoY to Rs 1,792 crore, its net interest margin (NIM) also improved 42 basis points to 2.72 per cent. 

"Our performance will improve from this quarter onwards and we are confident of meeting our guidance of posting around Rs 500 crore of profit for FY20," Mahapatra said.

The optimism stemmed from the fact that the bank's gross non-performing asset (NPA) improved to 11.76 per cent from 12.59 per cent a year earlier, while its net NPA improved to 5.96 per cent from 6.64 per cent earlier.

"We had a cash recovery of around Rs 800 crore this quarter. As far as NCLT accounts are concerned, we are estimating a recovery of close to Rs 1,500 crore for the whole fiscal," the CEO & MD said.

The bank, which plans to post a credit growth of around 13 per cent in this fiscal, has also seen greater momentum in the retail and SME accounts in the recent quarters. "We are also lending to corporate houses with a minimum of investment grade rating," Mahapatra said.

  

The bank also said that it has adequate amount of growth capital to support credit growth. By the end of June quarter, capital adequacy ratio of Syndicate Bank stood at 13.70 per cent as compared to 11.84 per cent a year ago. The bank has also sought the approval of the market regulator, Sebi for raising around Rs 500 crore through a QIP (qualified institutional placement).

"With last round of recapitalisation, the bank has enough growth capital  to expand the asset book.  Also, as part of this fiscal's recap plan, the capital position will be further strengthened," said Mahapatra.