Syndicate Bank, 1Q FY 2014

Please refer to important disclosures at the end of this report 1 Particulars ( ` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy) NII 1,337 1,344 (0.5) 1,319 1.4 Pre-prov. profit 949 901 5.3 841 12.8 PAT 452 592 (23.6) 440 2.7 Source: Compan y, Angel Research For 1QFY2014, Syndicate Bank reported a weak operating performance, as the NII remained largely flat. The Non-interest income grew at a healthy pace of 25.0% yoy. The bank witnessed asset quality pressures during the quarter, as Gross NPA levels increased sequentially by 19.3% (on a relatively low base); a 4.6% yoy decline in provisioning, resulted in a higher 56.4% sequential increase in Net NPA levels. At the PBT level, earnings grew by 40.0% yoy, however, as the bank had a negative tax rate of 34.1% for 1QFY2013 as compared to positive tax rate of 1.5% for the quarter under review, the growth in bottom-line came in muted at 2.7% yoy. NIM declines qoq; Slippages higher sequentially: During 1QFY2014, the bank witnessed a healthy growth in its business, as advances grew by 15.6% yoy, while the growth in deposits came in at 16.0% yoy. Despite the 37.9% yoy growth witnessed in current deposits, the growth in CASA deposits remained healthy at 15.5% yoy, due to moderate growth of 9.0% yoy in saving deposits. CASA ratio for the bank remained stable at 28.0%. During the quarter, the bank witnessed a 33bp sequential decline in its yield on advances to 9.7%, hence the NIM for the bank declined by 14bp qoq to 2.8%. During 1QFY2014, the non-interest income (excluding treasury) for the bank de-grew by 1.4% yoy to ` 210cr, largely due to 9.3% yoy de-growth in fee income to ` 107cr. On the asset quality front, slippages came in higher at ` 1,344cr (annualized slippage ratio of 3.6%) as compared to average quarterly run rate of around ` 890cr for the last four quarters. Due to higher slippages, Gross NPA levels, on an absolute basis, increased by 19.3% qoq, while Net NPA levels increased sequentially by 56.4%, due to decline in PCR by 666bp qoq to 76.8%. Gross and net NPA ratios increased sequentially by 39bp and 43bp respectively to 2.4% and 1.2%. During the quarter, the bank restructured advances worth ~ ` 883cr during the quarter, thereby taking its outstanding restructured book to ` 9,657cr. As per the Management, no major advances are in the restructuring pipeline. Outlook and valuation: Though, the bank has a modest CASA and fee income franchise, with a CASA ratio of 28.0% as of 1QFY2014 and fee income at 0.5% of average assets as of FY2013, it has relatively comfortable asset quality outlook as compared to peers owing to its diversified loan book. But, in any case, we believe that the asset quality pressures for the banking sector are unlikely to abate as quickly as was expected earlier, as we take into account recent macro developments amidst an overall weak macro environment. Hence, we remain Neutral on the stock. Key financials (Standalone) Y/E March ( ` cr) FY2012 FY2013 FY2014E FY2015E NII 5,085 5,454 5,539 6,185 % chg 16.0 7.3 1.6 11.7 Net profit 1,313 2,004 1,262 1,415 % chg 25.3 52.6 (37.0) 12.2 NIM (%) 3.1 2.8 2.5 2.5 EPS ( ` ) 21.8 33.3 21.0 23.5 P/E (x) 3.4 2.2 3.6 3.2 P/ABV (x) 0.6 0.5 0.4 0.4 RoA (%) 0.8 1.0 0.6 0.6 RoE (%) 17.9 22.8 12.5 12.8 Source: Company, Angel Research; CMP as of August 6, 2013 NEUTRAL CMP ` 75 Target Price - Investment Period - Stock Info Sector Bloomberg Code Shareholding Pattern (%) Promoters 66.2 MF / Banks / Indian Fls 15.3 FII / NRIs / OCBs 6.6 Indian Public / Others 11.9 Abs. (%) 3m 1yr 3yr Sensex (4.8) 7.6 3.2 Syndicate Bank (42.5) (22.9) (29.4) Reuters Code SBNK.BO SNDB@IN BANKS Market Cap ( ` cr) 4,488 Beta 1.4 52 Week High / Low 145/71 Avg. Daily Volume 142,189 Face Value ( ` ) 10 BSE Sensex 18,733 Nifty 5,542 Vaibhav Agrawal 022 – 3935 7800 Ext: 6808 [email protected] Sourabh Taparia 022 – 3935 7800 Ext: 6872 [email protected] Harshal Patkar 022 – 3935 7800 Ext: 6847 [email protected] Syndicate Bank Performance Highlights 1QFY2014 Result Update | Banking August 6, 201 3

Syndicate Bank, 1Q FY 2014

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