Public sector lender Syndicate Bank hopes to return to profit by March 2019 after posting losses in the past three quarters.
The bank is betting big on recovery from NCLT (National Company Law Tribunal) proceedings, improvement in CASA ratio and reduction in the provision for treasury operations to turn itself profitable by the end of this financial year.
"During the first two quarters, some of the required resolutions under the Insolvency and Bankruptcy Code (IBC) did not take place. Now, we are seeing a large number of resolutions coming in, as a result, we are expecting roughly Rs 7-8 billion will come back to the bank," said Mrutyunjay Mahapatra, managing director and chief executive officer, Syndicate Bank.
The bank has already recovered Rs 4 billion under the NCLT proceedings.
The bank's treasury operations were keeping a mark-to-market provision of about Rs 5 billion excess based on a yield expectation of 8.01 per cent.
With the yield expectation coming down to 7.60 per cent now, a 40 basis point reduction will bring in Rs 5 billion of profit. Similarly, we are expecting that the CASA ratio will increase to 35 per cent (from 31 per cent at present), which will earn the bank a sum of Rs 5 billion, he added.
The Manipal-headquartered bank is targeting to increase its home loan portfolio, which stands at Rs 270 billion at present, by Rs 100 billion.
The bank has about Rs 700 billion as unrealised interest and principal.
It has proposed to raise equity by issuing stock to its staff under the EPSO scheme. Shares will be given at a 15-25 per cent discount to employees. The bank will issue 300 million shares to employees to raise this capital.
"The proposal to raise capital up to Rs 5 billion under EPSO route was approved in the extraordinary general meeting and the bank will approach Sebi soon for its consent. The move has twin objectives of retaining talent while raising capital," said Mahapatra.
The government and public shareholding in the bank is presently in the ratio of 72:28 and the government may shed two per cent for raising new funds.
Syndicate Bank had reported a net loss of Rs 15.24 billion in the second quarter due to higher provisioning for bad loans. The bank's bad loans rose for the quarter, with gross NPA hitting 12.98 per cent of the gross advances and net NPA at 6.83 per cent.
It has also set a target to recover Rs 30 billion from the recovery of non-performing assets.