Syndicate Bank Posts Dismal Set Of Q4 Numbers, Net Profit Shrinks By 31%

Syndicate Bank, one of the midsized public sector banks, has delivered bad set of numbers for Q4FY14. Net profit of the bank has plummeted by 31% on yearly basis and stood at Rs 409.3 crore for the quarter ended March 2014. The fall in the net profit was attributed to the subdued increase in net interest income (NII), rise in provisions & contingencies and one off item in Q4FY13 of MAT credit of Rs 114 crore, which was not available during last quarter. Fall in the profit of the bank was partly arrested by the better increase in other income, which increased by 16% on yearly basis to Rs 461.63 crore for Q4FY14. 

NII of the bank was recorded at Rs 1432.66 crore for the quarter ended March 2014 against Rs 1344.33 crore in the same quarter of previous year. Bank's interest expended went up by 14% on yearly basis compared to 12% increase witnessed in interest earned by the bank in the same period. Lower interest income was due to higher slippages of NPAs, which led to lower yield on advances and hence lower NII. This also led to lower net interest margin for the banks, which declined by 18 basis points on yearly basis and was at 2.79% for Q4FY14.

Provision & contingencies of the bank has increased by enormous 74% on yearly basis to Rs 631.49 crore for Q4FY14. There was marked decline in the provision coverage ratio of the bank on yearly basis and was at 70.02% at the end of FY14 against 83.41% at the end of FY13. Other indicator of the bank's asset quality remained a mixed bag. Although on absolute basis the gross non-performing assets (NPAs) and net NPA has increased marginally, it has declined as proportion to gross and net advances.  Gross NPA and net NPA ratio has declined by 18 basis points and 10 basis points on sequential basis and stood at 2.62% and 1.56% at the end of Q4FY14 respectively. 

Post these dismal set of numbers, shares of the bank dropped by 6.22% and closed at Rs 100.25. With book value of Rs 189.63 per share at the end of FY14 each share of the bank is trading at price to book value of 0.52 times. We believe asset quality of the bank remains a concern and hence one should stay away from the stock as of now, despite attractive valuation.