• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

C.R. Sukumar

HYDERABAD, April 17

OWING to the setback in the agricultural sector across the country in general and in States such as Andhra Pradesh and Karnataka in particular, Syndicate Bank, the Manipal-based Rs 44,000-crore premier public sector bank, foresees the possibility of a marginal rise in its non-performing assets for the fiscal ended March 31, 2003.

However, the bank is confident that the situation might not significantly reduce its interest margin. As on March 31, 2002, Syndicate Bank had one of the best interest spreads at 3.65 per cent, above the industry average of around three per cent. The major contributing factor is the large low-cost deposits which account for nearly 40 per cent of the total deposits.

Admitting that the fiscal 2002-03 was expected to be a dampener on asset quality due to the bank's exposure to the agriculture sector, the Syndicate Bank Chairman and Managing Director, Mr Michael Bastian, told Business Line that the bank would still be better of compared with the peer group.

"We have adopted a three-pronged strategy to tackle the NPAs. One is recovery. Another is upgradation and the third one is write-off. For the year ended March 31, 2003, we expect to recover around Rs 250 crore. A part of it would go to the profit and loss account because it was already provided for. Some of it would go for write-offs, thereby reducing the net NPAs. Our current gross NPAs would be in the range of Rs 1,500 crore and net NPAs at around Rs 700 crore, about five per cent of our total advances as at the end of March 2003. We will be making adequate provisions. We expect a good year of results for 2002-03."

According to Mr Bastian, the bank has been focussing more on average growth of business and not much on terminal figure. "By March 2005, we should have a business size of around Rs 85,000 crore. On an average, we want to grow in the range of 15 - 18 per cent per annum. Now, we are nearing the terminal figure of around Rs 50,000 crore globally. Of this, the domestic business would be in the range of Rs 46,000 crore and the business from our London branch would be around Rs 4,000 crore."

On the pressure on interest spreads, Mr Bastian said the situation was equally applicable to the entire banking industry. "We are no exception. But since the cost of funds and deposits have also come down, we may be somewhere near three per cent spread."

"We now have around 20-million customers and we are planning for a net addition of another five-million customers in the next couple of years' period. Effectively, we may have to add around seven-million customers to take our total strength to 25-million customers."

Claiming comfort over the current capital adequacy level at 12.71 per cent, Mr Bastian said the bank was planning to return around Rs 100 crore to the Government, mainly aimed at improving its earnings per share (EPS).

"Simultaneously, we are planning to raise similar amount as tier-II capital, for which we have already obtained the necessary approvals of the Government. We expect to complete this process by July or August."

Article E-Mail :: Comment :: Syndication

Stories in this Section
Syndicate Bank sees hit from farm loans

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line