Syndicate Bank: Recommendation Review

We had recommended Syndicate Bank to investors in DSIJ Vol. 27, Issue No. 26 (dated December 18, 2011), when it was trading at Rs 99.10. We had recommended the scrip as it was available at a fair valuation, had good business growth (advances and deposits), its asset quality had improved and it showed the ability to survive in uncertain times. After our recommendation, the stock went up. Through our ‘Book Profit’ SMS service, we had recommended booking profits at Rs 110.70. The scrip is now trading at Rs 98.30, which is slightly lower than our recommended price.

In the December quarter of FY12, the net NPAs of the bank contracted by nine basis points to 0.86 per cent on a YoY basis, showing an improvement. Its Net Interest Margin (NIM) was under pressure, as it decreased by 13 basis points to 3.45 per cent on a YoY basis. Further, during the March quarter of 2012, it received approximately Rs 300 crore in terms of capital infusion from the government (Life Insurance Corporation).

Recently, the RBI has slashed the repo rate by 50 basis points, and this will help the economy and the banking space going ahead. On the other hand, however, macroeconomic concerns like sticky inflation, rupee depreciation and high the current and fiscal account deficits will adversely impact the economy.