 "Rise in bond yields, bad loans hurt govt banks")
While bad loans continue to hurt public-sector lenders, hardening of bond yields further dampened their earnings during the April-June 2015 quarter, with three large banks reporting sharp decline in net profit for the quarter.
Punjab National Bank (PNB)'s net profit for the quarter under review almost halved to Rs 721 crore as bad loans went up on a year-on-year (y-o-y) basis, though it marginally came down on sequential basis. PNB’s gross non-performing assets declined, albeit marginally, after eight straight quarters of increase. The gross non-performing assets (NPAs) of the bank increased from Rs 25,397 crore in the June quarter of the current financial year (FY16) against Rs 19,603 crore in the same quarter of FY15.
“Asset quality concerns around public-sector banks continue and it has been witnessed in the results that came out today (Tuesday). Even though PNB has seen that the gross NPA has not increased, fresh NPA generation has been high,” said Vibha Batra, senior vice-president, Icra.
Bank of India (BoI), reported a whopping 84 per cent decline in net profit at Rs 130 crore owing to higher provisioning towards wages and bad loans. The bank had deferred provisioning of some NPAs. In addition, the bank revised the mortality tables, as prescribed by the Life Insurance Corporation, for which provisioning towards pension has gone up. In addition, profit from sale of investments also declined by 26 per cent to Rs 179 crore.
“The bank had deferred provision of Rs 709.31 crore in respect of certain NPAs and loss of Rs 403.21 crore for sale of certain NPAs to be amortised over a period of three quarters commencing from June 2015,” said the bank. The bank has to make nearly Rs 800 crore of provisioning in each of the next two quarters, according to the amortisation schedule.
“We have paid the past dues (provisioning), else our profit would have been higher,” said B P Sharma, executive director of the bank, who has been given the additional charge of CEO after V R Iyer retired in May.
BoI had reported a loss of Rs 56 crore in the January-March quarter, owing to higher provisioning towards bad loans. NPA had haunted the bank in the first quarter, too, with provisioning for such loans touching Rs 2,240 crore. Sharma said while provisioning towards bad loans will continue, the pace could come down. “We are hoping our gross NPA of March 2016 will be lower than what it was in March 2015,” he said. The bank reported gross NPAs of Rs 27,000 crore, which was 6.8 per cent of its total advances. Its stressed asset, gross NPA plus restructured advances, are 11.1 per cent. Five sectors — mining, iron & steel, textile, aviation, and infrastructure — contributed 50 per cent of the total stressed advances.
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Union Bank of India reported a 22 per cent decline in net profit to Rs 518.78 crore for the June 2015 quarter. The bank made a provision of Rs 199 crore for depreciation in investments during the quarter against a write-back of Rs 138 crore in the year-ago period.Punjab National Bank (PNB)'s net profit for the quarter under review almost halved to Rs 721 crore as bad loans went up on a year-on-year (y-o-y) basis, though it marginally came down on sequential basis. PNB’s gross non-performing assets declined, albeit marginally, after eight straight quarters of increase. The gross non-performing assets (NPAs) of the bank increased from Rs 25,397 crore in the June quarter of the current financial year (FY16) against Rs 19,603 crore in the same quarter of FY15.
“Asset quality concerns around public-sector banks continue and it has been witnessed in the results that came out today (Tuesday). Even though PNB has seen that the gross NPA has not increased, fresh NPA generation has been high,” said Vibha Batra, senior vice-president, Icra.
Bank of India (BoI), reported a whopping 84 per cent decline in net profit at Rs 130 crore owing to higher provisioning towards wages and bad loans. The bank had deferred provisioning of some NPAs. In addition, the bank revised the mortality tables, as prescribed by the Life Insurance Corporation, for which provisioning towards pension has gone up. In addition, profit from sale of investments also declined by 26 per cent to Rs 179 crore.
“The bank had deferred provision of Rs 709.31 crore in respect of certain NPAs and loss of Rs 403.21 crore for sale of certain NPAs to be amortised over a period of three quarters commencing from June 2015,” said the bank. The bank has to make nearly Rs 800 crore of provisioning in each of the next two quarters, according to the amortisation schedule.
“We have paid the past dues (provisioning), else our profit would have been higher,” said B P Sharma, executive director of the bank, who has been given the additional charge of CEO after V R Iyer retired in May.
BoI had reported a loss of Rs 56 crore in the January-March quarter, owing to higher provisioning towards bad loans. NPA had haunted the bank in the first quarter, too, with provisioning for such loans touching Rs 2,240 crore. Sharma said while provisioning towards bad loans will continue, the pace could come down. “We are hoping our gross NPA of March 2016 will be lower than what it was in March 2015,” he said. The bank reported gross NPAs of Rs 27,000 crore, which was 6.8 per cent of its total advances. Its stressed asset, gross NPA plus restructured advances, are 11.1 per cent. Five sectors — mining, iron & steel, textile, aviation, and infrastructure — contributed 50 per cent of the total stressed advances.
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In addition, provisioning towards bad loans rose to Rs 480 crore compared to Rs 426 crore. The gross NPAs as a percentage of total advances increased to 5.53 per cent during June quarter, against 4.27 per cent in the year-ago period. Net interest income remained flat at Rs 2,130 crore during the quarter, compared withRs 2,117 crore a year ago.
“The slippages are showing signs of moderation. The bank expects gross NPA to drop to 4.75 per cent by March 2016,” said Arun Tiwari, chairman and managing director, Union Bank.
While banks sounded optimistic on bad loans going forward, analysts are not convinced. “Since the regulatory forbearance window on restructuring the account also closed down from this quarter onwards, we were not expecting the situation around asset quality to improve and the results show that. We believe the slippages will remain elevated for the entire year,” said Icra’s Batra.