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.

Re­cov­ery ver­ti­cal

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.

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