CRISIL's rating on the debt instruments of Syndicate Bank continues to reflect the support that Syndicate Bank is likely to receive from its majority owner, the Government of India (GoI), both on an ongoing basis and in the event of distress; and the bank's adequate capitalisation and asset quality. These rating strengths are partially offset by Syndicate Bank's modest earnings profile and the challenges it faces in improving its resource profile in the present environment.
The rating continues to factor in the strong support that Syndicate Bank is likely to receive from GoI, both on an ongoing basis and in the event of any distress. This is because GoI is both the majority shareholder in public sector banks (PSBs) and the guardian of India's financial system. The stability of the banking sector is of prime importance to GoI, given the criticality of the sector to the economy, the strong public perception of sovereign backing for PSBs, and the severe political repercussions in case of failure of any PSB on sovereign creditworthiness.
CRISIL believes that support from GoI along with adequate capitalisation and asset quality will continue to help Syndicate Bank offset the weaknesses in its profitability and resource profile. The outlook may be revised to 'Positive' if Syndicate Bank reports a significant and sustained improvement in its earnings profile, while improving its market position. Conversely, the outlook may be revised to 'Negative' if Syndicate Bank is unable to maintain its Tier-I CAR well above the regulatory minimum, or in case of a sustained weakening in the bank's asset quality and profitability.
