Expect overall growth in the area of 8-10%: Syndicate Bank

Syndicate Bank posted a strong set of Q2 earnings. In an interview to CNBC-TV18, Melwyn Rego, MD & CEO of Syndicate Bank spoke about the results and his outlook for the company.

Below is the verbatim transcript of the interview:

Q: Let's talk about asset quality which was a stunning performance from Syndicate Bank this time. Can we now say with some certainty that the asset quality problem peak is behind us? Can you guide us for slippages for the current quarter?

A: We have done quite well in this quarter and we have been able to contain the slippages. The gross and net non-performing assets (NPAs) have reduced; the gross NPAs from 9.96 percent to 9.39 percent and net NPAs from 6.27 percent dropped to 5.76 percent. However, we are targeting that the provision coverage ratio (PCR) also should keep increasing. The PCR a year back was 53.7 percent and has increased to 56.21 percent. Going forward I do not see any increase overall in the gross NPA level, in fact net NPA is likely to drop. So whatever additional accretion is there would be offset by the recovery and upgradation.

Q: In Q1 slippages were Rs 3,500 crore, in Q2 it's less than Rs 1,500 crore. So less than half by a good measure; so is Rs 1,500 crore the run rate at least that we can expect or even lower?

A: No, it would be around that level but as I said upgradation and recovery would match that.

Q: What have been the recovery figures and the likely trend?

A: The upgradation and recovery has been Rs 1,583 crore and slippage was Rs 1,576. We see this trend even in the next two quarters.

Q: The positive part is that advances have grown. We cannot say this of all the banks. This bank has been able to grow albeit only by mild 2.5 percent. How is this quarter turning out, after all we are in a busy season?

A: We are looking at growth in retail, agriculture and overall during the year we expect growth in the area of 8-10 percent.

Q: When it comes to public sector banks, you all would be in top three in terms of least amount of NPAs - that would entitle you to growth capital as well as loan loss capital. How much would you estimate in terms of capital requirements?

A: Overall we would like to be somewhere in the common equity tier 1 (CET1) at about 8 percent because that would give us fair cushion and also improve the rating for the purpose of additional tier 1 (AT1) issuance.

Q: What is the CET now?

A: At the moment CET is 7.23 percent.

Q: So you will need 70 bps and plus for a growth of 8-10 percent what is the amount you are looking at?

A: We are looking at an amount between Rs 1,000 and 1,500 crore and this would be a combination of raising funds in the market.

Q: When we will hear about you going to the market. Only after you know your capital number?

A: That's right. We are working on that and we would be looking at initiating something this quarter.

Q: No divergence?