Merger talks with Clix on track, says LVB even as losses widen in Q2

Auditors issue qualified report citing precarious capital position

Troubled private lender Lakshmi Vilas Bank (LVB) has reported widening of its net loss to Rs 397 crore in the July-September quarter (Q2) because of rise in bad loans and provisions.

The bank had posted a net loss of Rs 357.18 crore in the same month a year ago and Rs 112.28 crore in Q1FY21. Net interest income fell to Rs 420.13 crore, down 27.7 per cent YoY.

Increase in income from other sources at Rs 74.45 crore, against Rs 58 crore last year, helped LVB narrow its operating losses to Rs 5.66 crore in Q2 versus Rs 40.37 crore last year.

“The bank also undertook some cost rationalisation,” said Shakti Sinha, member, committee of directors, LVB. Reduction in staff count, optimisation of ATM (automated teller machine) costs, reducing five bank branches and overall reduction in rentals were some measures taken, he added.

The bank’s asset quality further deteriorated with gross non-performing assets (NPAs) increasing to 24.45 per cent in Q2 from 21.25 per cent a year ago. But sequentially, it improved from 25.40 per cent.

Gross NPAs, in absolute terms, stood at Rs 4,063.27 crore in Q2, against Rs 4,091.05 last year. Net NPAs posted an improvement at 7.01 per cent in Q2 against 10.47 per cent a year ago. Provisions for bad loans and contingencies increased to Rs 391.34 crore in Q2, up 19 per cent YoY.

Against Rs 794 crore loans extended to RHC Holding Pvt Ltd and Ranchem, group companies of Religare Finvest, against its deposits, and now under litigation, the bank provided Rs 200 crore as a special provisioning (buffer). It did not affect its capital position.

It also provided for its exposure to fitness brand Talwalkars group in Q2 and Rs 20.26 crore towards Covid-19 contingencies.

LVB’s overall capital adequacy took a further knock in Q2, falling to -2.85 per cent, down 100 basis points (bps) sequentially. This is below the minimum requirement of 8.87 per cent. Its tier-1 capital ratio deteriorated to -4.85 per cent from -1.83 per cent in Q1.

“The said assumption of a going concern is dependent upon the bank’s ability to achieve improvements in liquidity, asset quality and solvency ratios, augment its capital base and mitigate the impact of Covid-19. Thus, a material uncertainty exists that may cast a significant doubt on the bank’s ability to continue as a going concern,” the auditors qualified in their report. This is the second consecutive quarter of a qualified audit report.

As for capital raise, LVB said significant progress with Clix group is being made. “There was a minor incremental due diligence requested by Clix Group, which was completed this week. Now, the respective sides are in the process of a workable and mutually-acceptable framework,” the bank said in a release.