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— G.R.N. Somashekar

Mr George Joseph, Executive Director, Syndicate Bank (left) and Mr B.S. Surendra, General Manager, at a press conference in Bangalore on Wednesday.

Our Bureau

Bangalore, May 14 Syndicate Bank repriced its bulk deposits, shaving off as much as 2 per cent of the interest in the current financial year (2008-09).

Addressing media persons here on Wednesday, Syndicate Bank’s Executive Director, Mr George Joseph, said, “We have taken a decision to contain bulk deposits in the current year.” The bank took the decision after it took a hit on the net interest margin (NIM) for the last financial year.

NIM, which is the spread between the interest earned and the interest expended, dropped by 15 basis points in the financial year 2007-08 over the corresponding period of the previous year.

Syndicate Bank had bulk deposits of about Rs 30,000 crore in FY08 or about 31 per cent of its global deposits portfolio of Rs 95,171 crore.

Mr Joseph said that part of the reduction in NIM also stemmed from the increase in the cash reserve ratio.

The bank had taken a hit of Rs 150 crore on account of the hike, he said. In FY08, CRR was hiked by 1.75 per cent.

He, however, said that the bank hoped to improve NIM in the current year, through better top and bottomline growth.

The bank has targeted a business growth of about Rs 1.9 lakh crore for the current financial year. Deposits are projected to grow at 21 per cent and advances by 19 per cent.

He said that bank then hoped to improve its margins with the focus on low-cost deposits or current and savings accounts. CASA comprised about 31 per cent of gross deposits in FY 08. In FY 09, the bank hoped to increase it to 35 per cent. The bank also reported a provision of Rs 14 crore on depreciation of its credit linked note (CLN) of $60 million. The CLN was extended by the bank’s London office to a large domestic corporate. Mr Joseph said, “We made the provision on a marked to market basis as we do every quarter. There is no risk on the exposure, since it was to a large domestic corporate. He also said that the bank had little derivative exposure. “We have no such worries,” he said.

Referring to the capital raising plans for the current year, Mr Joseph said, the bank was awaiting approval from the Finance Ministry for its placement of 8 crore equity shares with qualified institutional buyers. There was also the option of the follow-on public issue route.

The placement would bring down the Government stake in the bank’s equity to 57 per cent. Currently, the Government holding in the bank’s equity is 66.47 per cent.

In addition, the bank also had the option of tapping the Medium Term Note of up to $155 million. However, Mr Joseph admitted, “Turbulence in the global financial markets is not conducive for a favourable pricing.” Consequently, he said, that unless the situation improves, the bank is unlikely to tap into the international markets.

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