Syndicate Bank to cut down cost of funds to shore up NIM
Lender plans to raise ₹500 cr via ESPS by January
Syndicate Bank will focus on increasing the share of lowcost CASA deposits and growing its retail loan book to shore up its net interest margin (NIM) to 2.5 per cent by the end of this fiscal. Its NIM currently stands at 2.25 per cent.
“The focus would be on increasing the share of CASA deposits by nearly four percentage points. Each percentage of increase in CASA, given my balance sheet size of ₹2.6 lakh crore, should give me a saving of ₹50-55 crore on cost of funds. We are also looking to bring down the share of high-cost bulk deposits,” Mrutyunjay Mahapatra, MD and CEO, Syndicate Bank, told BusinessLine. Mrutyunjay Mahapatra, MD and CEO, Syndicate Bank
CASA currently accounts for nearly 31 per cent of its total deposits. This should increase to 34 per cent by the end of this fiscal. The bank has also been focussing on increasing the share of high-rated assets and growing its retail and SME loan book.
“Over the last six to nine months, there has been perceptible shift from low-rated to high-rated assets. We expect our loan book to grow by around 5 per cent in the next two quarters,” he said.
Syndicate Bank, which recently received ₹728 crore from the government through preferential allotment of shares, is looking to raise close to ₹500 crore through employee stock purchase scheme (ESPS) by January 2019.
This apart, we are also looking to raise an additional ₹500 crore through preferential issue of shares by the end of this fiscal.
As on September 2018, its capital adequacy ratio stood at 10.95 per cent.
“The fund infusion of ₹728 crore by the government has already shored up our capital adequacy ratio by 0.45 per cent.
“This additional infusion of ₹1,000 crore will give a
The bank has created a recovery and resolution vertical, and has deployed 1,500 people to focus on recovery
further uptick of 0.65-0.7 per cent,” he said. According to Mahapatra, there are some asset quality concerns, but the corporate loan book is ‘bottoming out’. There is an uptick in demand from certain sectors, including construction, cement and pharma. However, he expressed concern regarding the pressure building up in the agriculture sector, with a number of States announcing debt waivers.
“While this is an issue, however, we are also seeing that a large number of governments have made specific budget provisions to pay back banks’ dues.
“So, while the culture of credit is getting a bit dented because of debt waiver announcements, we expect it to be neutral in terms of payments received from the government,” he said.
Syndicate Bank is expecting to recover close to ₹3,000-4,000 crore from stressed assets by September 2019.
Of this, nearly ₹1,600 crore would come through resolution of cases under the NCLT by March 2019.
The bank has also created a separate recovery and resolution vertical, and has deployed a workforce of around 1,500 people to focus on recovery and upgradation.
As on September 2018, the bank’s gross NPA was 12.98 per cent and net NPA 6.83 per cent. The bank expects to bring down its net NPA by 810 basis points to below 6 per cent levels by March 2019.