Syndicate Bank Puts Up A Weak Show For Q1FY14

Syndicate Bank (SB), today, announced disappointing result for the first quarter of FY14. The bank's interest income (which mainly includes interests on its investment and interest earned from advances) stood at Rs 4432 crore by showing marginal growth of 4.5% on a yearly basis. On the basis of segments, the bank's revenue from corporate banking grew only 5% and income from treasury operations showed growth of 15% in Q1FY14 over the last fiscal.

Further, the major expense for a bank is interest expended on its borrowings, which contributes heavily up to almost 82% to its overall expenditure. The bank's interest expended boosted by 6% in the June quarter in FY14 against Rs 229 crore in the similar period of FY13. Its other expenses too showed a spurt to the extent of 7%. The bank has reported its employee expenses as Rs 439 crore from Rs 485 crore in Q1FY13 with a decline of 9.5% cent over the same period last year. However, the bank has opened 70 new branches in the said quarter. But the bank seems to have over-employed during the same period last year as compared to this year as there was a considerable decline in the employee costs despite the 70 new branches.

Interestingly, the bank's operating income increased by 13% to Rs 948.6 crore in Q1 of the current fiscal. However, its net interest income (NII) reported growth of just 1% to Rs 1337 crore on a yearly basis. Further, the bank's bottomline was impacted to stand at Rs 452 crore, with little growth of 3% over the last fiscal's corresponding period. The bank's asset quality too deteriorated on a sequential basis. Its provisioning increased to Rs 489 crore in Q1FY14 against Rs 364 crore in Q4FY13 on a sequential basis. Further, the bank's net NPAs, on sequential basis, grew by 43 basis points to 1.19%.

The slowdown in the bank's NII growth and deteriorating asset quality are the main concerns. We, at Dalal Street Investment Journal, recommend that readers stay away from this bank.