 "Axis, IDBI Bank profits hit by NPA provisioning")
Six listed commercial banks on Tuesday reported a mixed performance for the second quarter ended September 2016. Banks with large exposure to corporates — Axis Bank and IDBI Bank — saw a sharp drop in net profit as they had to make more provisions for stressed assets. In contrast, three banks — HDFC Bank, Kotak Mahindra Bank and Federal Bank — reported a robust increase in net profit on improvement.
Axis Bank
Private lender Axis Bank posted a sharp 83 per cent fall in net profit to Rs 319 crore in the September 2016, quarter from Rs 1,915 crore in the corresponding year-ago period. The provisions and contingencies rose over five times to Rs 3,622 crore, from Rs 707 crore during this period.
The bank’s gross non-performing loans (NPAs) rose to 4.17 per cent of its gross advances (loan book), from 1.38 per cent in last year’s September quarter. In absolute terms, gross NPAs stood at Rs 16,379 crore, compared to Rs 4,415 crore in September 2015 quarter. In the quarter ended June 2016, its gross NPAs were at 2.54 per cent (Rs 9,553 crore) of its advances.
For Axis Bank, the pressure on its asset quality is expected to continue for at least two more quarters. In the March quarter, Axis Bank had put out a watchlist of Rs 22,628 crore and had stated that it expects 60 per cent of the loans from it to fall into NPAs. However, now the bank has revised its guidance and expects an even higher percentage of accounts to slip into the bad loans category.Jairam Sridharan, chief financial officer, Axis Bank, explained that even though the macro environment is improving the pressure on wholesale and corporate lending remains. “Some of the resolution mechanisms such as scheme for sustainable structuring of stressed assets, strategic debt restructuring, etc haven’t worked out as expected and this has also led to an increased number of accounts slipping (turning bad). There needs to be some modifications with respect to the structure of the tools and the lenders coming together for recovery,” he explained.
HDFC Bank
HDFC Bank — the country’s second largest private sector lender — posted 20.4 per cent growth in net profit to Rs 3,455 crore in the July-September quarter, helped by higher net interest income and lower provisions.
This was in line with Bloomberg estimates of Rs 3,456 crore. Net interest income, the difference between interest earned and interest expended, grew by 19.6 per cent year-on-year to Rs 7,994 crore. This was supported by higher loan growth, with 21.7 per cent in retail and 14.3 per cent in wholesale.
Asset quality remained stable with gross NPAs at 1.02 per cent of advances as compared to 1.04 per cent in June quarter. In the same period net NPAs also improved to 0.30 per cent, compared to 0.32 per cent in the previous quarter.
The bank’s capital adequacy remained stable at 15.4 per cent.
Kotak Mahindra Bank
Kotak Mahindra Bank’s consolidated net profit increased 28 per cent to Rs 1,202 crore, from Rs 942 crore in the year ago period. Its consolidated net interest income increased by 17 per cent to Rs 2,664 crore.
Net interest margin, the difference between yields on advances and cost of funds, improved to 4.47 per cent on a standalone basis in the quarter, from 4.37 per cent in June 2016 quarter and 4.30 per cent in the September 2015 quarter.
Asset quality improved with gross NPAs to gross advances improving to 2.49 per cent, compared to 2.50 per cent in the quarter ended June on a standalone basis. In the same period net NPA also improved to 1.20 per cent, compared to 1.21 per cent in the previous quarter.
The bank remains well-capitalised with consolidated capital adequacy ratio of the bank (including unaudited profits as per Basel III as of September 30, 2016) at 17.3 per cent and Tier I ratio at 16.5 per cent.
The other three
Public sector lender IDBI Bank’s net profit contracted by 53.8 per cent to Rs 55.08 crore in September quarter of FY17, from Rs 119.5 crore for the corresponding year-ago period. Its provisions for bad loans jumped to Rs 920 crore from Rs 666 crore during this period. The gross NPAs swelled to 13.05 per cent (Rs 30,133 crore) of loan book in September 2016 quarter, from 6.92 per cent (Rs 14,757 crore) a year ago. Sequentially, too, this metric has worsened, given that its bad loans were at 11.92 per cent (Rs 27,275 crore) of loan book at end of June 2016.
Backed by a healthy growth in interest income, Federal Bank — the Kochi-based private lender — reported marked improvement in bottom line. It posted a 25 per cent growth in its net profit at Rs 201.24 crore in September 2016 quarter, from Rs 161.25 crore in the corresponding period last year.
IDFC Bank, which morphed into a commercial bank last year, posted a net profit of Rs 388 crore in the second quarter ended September 2016.
Axis Bank
Private lender Axis Bank posted a sharp 83 per cent fall in net profit to Rs 319 crore in the September 2016, quarter from Rs 1,915 crore in the corresponding year-ago period. The provisions and contingencies rose over five times to Rs 3,622 crore, from Rs 707 crore during this period.
The bank’s gross non-performing loans (NPAs) rose to 4.17 per cent of its gross advances (loan book), from 1.38 per cent in last year’s September quarter. In absolute terms, gross NPAs stood at Rs 16,379 crore, compared to Rs 4,415 crore in September 2015 quarter. In the quarter ended June 2016, its gross NPAs were at 2.54 per cent (Rs 9,553 crore) of its advances.
For Axis Bank, the pressure on its asset quality is expected to continue for at least two more quarters. In the March quarter, Axis Bank had put out a watchlist of Rs 22,628 crore and had stated that it expects 60 per cent of the loans from it to fall into NPAs. However, now the bank has revised its guidance and expects an even higher percentage of accounts to slip into the bad loans category.Jairam Sridharan, chief financial officer, Axis Bank, explained that even though the macro environment is improving the pressure on wholesale and corporate lending remains. “Some of the resolution mechanisms such as scheme for sustainable structuring of stressed assets, strategic debt restructuring, etc haven’t worked out as expected and this has also led to an increased number of accounts slipping (turning bad). There needs to be some modifications with respect to the structure of the tools and the lenders coming together for recovery,” he explained.
HDFC Bank
HDFC Bank — the country’s second largest private sector lender — posted 20.4 per cent growth in net profit to Rs 3,455 crore in the July-September quarter, helped by higher net interest income and lower provisions.
This was in line with Bloomberg estimates of Rs 3,456 crore. Net interest income, the difference between interest earned and interest expended, grew by 19.6 per cent year-on-year to Rs 7,994 crore. This was supported by higher loan growth, with 21.7 per cent in retail and 14.3 per cent in wholesale.
Asset quality remained stable with gross NPAs at 1.02 per cent of advances as compared to 1.04 per cent in June quarter. In the same period net NPAs also improved to 0.30 per cent, compared to 0.32 per cent in the previous quarter.
The bank’s capital adequacy remained stable at 15.4 per cent.
Kotak Mahindra Bank
Kotak Mahindra Bank’s consolidated net profit increased 28 per cent to Rs 1,202 crore, from Rs 942 crore in the year ago period. Its consolidated net interest income increased by 17 per cent to Rs 2,664 crore.
Net interest margin, the difference between yields on advances and cost of funds, improved to 4.47 per cent on a standalone basis in the quarter, from 4.37 per cent in June 2016 quarter and 4.30 per cent in the September 2015 quarter.
Asset quality improved with gross NPAs to gross advances improving to 2.49 per cent, compared to 2.50 per cent in the quarter ended June on a standalone basis. In the same period net NPA also improved to 1.20 per cent, compared to 1.21 per cent in the previous quarter.
The bank remains well-capitalised with consolidated capital adequacy ratio of the bank (including unaudited profits as per Basel III as of September 30, 2016) at 17.3 per cent and Tier I ratio at 16.5 per cent.
The other three
Public sector lender IDBI Bank’s net profit contracted by 53.8 per cent to Rs 55.08 crore in September quarter of FY17, from Rs 119.5 crore for the corresponding year-ago period. Its provisions for bad loans jumped to Rs 920 crore from Rs 666 crore during this period. The gross NPAs swelled to 13.05 per cent (Rs 30,133 crore) of loan book in September 2016 quarter, from 6.92 per cent (Rs 14,757 crore) a year ago. Sequentially, too, this metric has worsened, given that its bad loans were at 11.92 per cent (Rs 27,275 crore) of loan book at end of June 2016.
Backed by a healthy growth in interest income, Federal Bank — the Kochi-based private lender — reported marked improvement in bottom line. It posted a 25 per cent growth in its net profit at Rs 201.24 crore in September 2016 quarter, from Rs 161.25 crore in the corresponding period last year.
IDFC Bank, which morphed into a commercial bank last year, posted a net profit of Rs 388 crore in the second quarter ended September 2016.