See lower margins due to base rate reduction: Syndicate Bk

Syndicate Bank's second quarter net profit grew by 5.2 percent year-on-year to Rs 332 crore. It was supported by other income & operating profit and lower provisions but wage arrears and higher tax cost limited bottomline growth.

Speaking to CNBC-TV18, Arun Shrivastava, managing director and chief executive officer, says the bank saw a good pick up in retail and micro small and medium enterprises (MSME) business. 

However, he expects the year-on-year growth target to be not beyond 10 percent and a fall in net interest margins (NIMs) due to base rate reduction. But he is hopeful of recouping the loss on margins soon.

Furthermore, he says the bank has lowered its target to 150 branches from the earlier 300, given the slump in the current environment.Below is the transcript of Arun Shrivastava’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18.Latha: Can you take us through the asset quality. How much were the fresh slippages? On the face of it, the gross non-performing loans (NPL) were not too bad compared to the previous quarter. Can you tell us what were the fresh slippages and if you sold any loans to asset reconstruction companies (ARC)?A: Slippages during the current quarter was Rs 1,362 crore and as compared to the last quarter, it was less by Rs 675 crore. So, last quarter slippages were Rs 1,990 crore. We have not sold any assets to ARC during the current quarter.Latha: In the press conference you spoke about slippages, do you expect the slippages to be worse in the second half?A: The slippages were definitely broad-based. They were right from agriculture to corporate and mid-corporates as well. Some of them are in the real estate as well. Coming quarter also -- because we have seen a normal fall in the slippages from the restructured book around 2 percent or so, my gut feeling says that probably we may be able to contain the slippages from the current slippages, Rs 1,300 crore we had. So, it will be less than that in the coming quarters as well.Sonia: So, how many loans restructured under the 5:25 route this quarter and from which sector if you can tell us?A: Only one.Sonia: Anymore in the pipeline?A: As of now, I have not received any proposal so far but as and when it comes, we will examine it on the merits.Sonia: The most important issue for everyone is the non-performing asset (NPA) situation. Do you see your own gross NPLs lower by the end of the year?A: It should be. My endeavour would be to keep it to this level at least.Latha: Can you give us some colour on the credit growth, how much it was and what may you end the year with in terms of loan growth?A: This quarter, if you see on the overall numbers, the credit growth has been flat, but only thing we have re-jigged our portfolio, that our retail and micro, small and medium enterprises (MSME) has picked up, whereas our corporate book, we have shed some of the low cost corporate book advances and that is how it remains flat. Whereas, the credit growth has been there, it has been in the segment of MSME, it has been in housing loan, it has been in vehicle loan sector, there has been a growth. By the year end, my growth target, I do not put it beyond 10 percent.Latha: Your domestic net interest margins (NIM) were slightly lower year-on-year (Y-o-Y). Do you think you can maintain it at current levels?A: The margins will definitely come down because of the reduction in the base rate we have. However, at the same time, I expect a part of that to be recouped from our portfolio of retail and MSME where the margins are high as compared to the corporate book.Sonia: The bank currently has about Rs 3,500 branches and it opened 50 this quarter. What are the plans on branch addition especially in the context of increasing competition in the sector? Are you going to be aggressive in your own branch addition?A: Right now, as on date, we have opened about 150 branches. We had earlier, a year back a plan that we will be having about 300 branches, but right now, looking to the overall environment we will have a re-look on the places where we need to open the branches and probably we will open up another 100 branches or so definitely by the quarter ended March.Sonia: The government might look to increase the foreign direct investment (FDI) or foreign institutional investment (FII) cap to 49 percent in public sector undertaking (PSU) banks. Your thought on how much interest a bank like Syndicate Bank and the entire PSU banking space could see because of this?A: This, probably in the government somebody would be able to answer it more appropriately.