 "Syndicate Bank net hits 10-quarter low")
This is the sharpest drop in net profit reported by the public-sector lender in the past 10 quarters. The previous low was in the fourth quarter of FY14, when it reported a fall of 31 per cent at Rs 409 crore.
The decline in profit is attributed to the massive rise in provisions towards non-performing assets. The Manipal-based bank made a massive rise of 58.2 per cent in provisions to Rs 538 crore during the quarter against Rs 350 crore a year ago.
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Notably, S K Jain, who was the chairman and managing director then, was arrested by the Central Bureau of Investigation on August 2 for allegedly receiving illegal gratification of Rs 50 lakh from Bhushan Steel in return for granting credit extension to the company, which had defaulted on the payment of loan instalments amounting to several crores of rupees. Subsequently, the government terminated his services.
The total income of the bank rose 17 per cent to Rs 5,681 crore from Rs 4,850 crore in the September quarter of FY14. The operating profit was up 17.6 per cent to Rs 954 crore from Rs 811 crore in the year-ago quarter.
The bank’s shares closed 1.88 per cent lower at Rs 125 apiece on the BSE on Friday.
During the quarter, the bank witnessed fresh slippage of Rs 1,683 crore against Rs 1,741 crore in the same quarter last year. The slippages came in the textile sector, where one account turned into a non-performing asset (NPA) with a ticket size of Rs 380 crore. Provision coverage ratio stood at 65.38 per cent in the second quarter, compared to 70.58 per cent in the same quarter last year.
The size of gross NPAs increased 35 per cent to Rs 6,049 crore compared to Rs 4,472 crore in the year-ago period. The percentage of net NPAs increased to 2.2 per cent from 1.66 per cent in the year-ago period.
“Syndicate Bank’s performance is more or less similar to most other public-sector banks in the mid-size segment. Many other banks have seen similar dip in profits and rise in NPAs. As far as Syndicate Bank is concerned, its current management has followed a more cautious and conservative approach in sanctioning new loan applications after the arrest of S K Jain,” said an analyst with Espirito Santo Securities.
The asset quality of the bank has deteriorated in the past two quarters, he added.
The bank’s net interest income remained flat at Rs 1,422 crore compared to Rs 1,411 crore in the year-ago period. Higher taxes at Rs 100 crore against Rs 1 crore in the year-ago quarter also contributed to a decline in profits. Net interest margin came down to 2.57 per cent from 2.9 per cent in the corresponding quarter.
The capital adequacy ratio under Basel-III declined to 10.42 per cent from 11.58 per cent last year. The return on assets (RoA) dipped to 0.50 per cent from 0.89 per cent a year ago.
“The decline in RoA is a matter of concern for the bank as it has been declining over the past few quarters,” the analyst cited above added.
“The Bank has got adequate CRAR (capital to risk weighted assets ratio) to support credit expansion. But keeping in view the Basel-III requirement, we have sought permission from the government for infusion of fresh equity of Rs 1,100 crore through QIP (qualified institutional placement) route,” said M Anjaneya Prasad, executive director, Syndicate Bank.
He said the bank has obtained the board’s approval for raising additional Tier-I bonds of Rs 1,000 crore and Tier-II bonds of Rs 1,150 crore.
The bank would go to the market to raise Tier-II bonds shortly, said T K Srivastava, executive director.