Again CSB: Divergences cast doubt on March 2017 profit

THRISSUR: At last, for Catholic Syrian Bank (CSB), which is waiting for its rich suitor, is its proverbial ‘island of profit in the sea of red ink’ is being challenged?

The bank that has left behind a trail of loss-making years and quarters during the past three years has drawn solace from the small profit of Rs1.55 crore it posted for 2016-17, with the immediately preceding and succeeding years having been loss making periods.

But of late, this Rs1.55 crore profit itself could be interpreted as loss after the Reserve Bank of India (RBI) has made a clean breast of the divergences in asset classification and provisioning for non-performing assets (NPAs) in the 2016-17 financials.

RBI has brought out a divergence in provisioning to the tune of Rs9.10 crore with respect to NPAs for the period. And after providing for NPAs inter alia other divergences, it has been concluded that the adjusted (notional) net loss after tax is Rs13.40 crore against the Rs1.55 crore profit the bank announced for 2016-17.

When one takes stock of the performance of the bank, rarely could one see islands of profits within the sea of losses – which is always marked in red ink.

A cursory view will show that among the past three years, the bank has posted profit only once, for March 2017, with March 2016 posting a loss of Rs149.72 crore and March 2018 closing with a Rs97.47 crore loss; and now that profit itself is under suspicion.

Even the half years and quarters were no different for the bank, which is all set to more than double its equity capital. While the bank has ended the first quarter of the current year with a loss of Rs15.54 crore, the loss posted for the second half (H2) of 2017-18 was Rs84.34 crore and that for the first half (H1) was Rs13.13 crore.

However, Fairfax has reportedly acknowledged the ‘good work’ done by the management to improve the overall performance of the bank during the past couple of quarters and that has reportedly led to the Canadian company improving the offer price for the CSB shares to Rs140 per share from about Rs95 it offered in May last in the process to acquire a majority stake in the bank.

The bank is said to be sprucing up its operations and books in preparation to embrace a new era once the Fairfax investment of Rs1200 crore enters the bank’s book in the near future itself.

A scramble for shares is building up in the grey market for CSB shares in the hope that the top investors, whose holding would get diluted by almost half once Fairfax investment is effected, will try to rebuild that towards the five per cent mark, taking the price further upwards.

 

 

 

 

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