 "Rise in NPAs hits PSB third quarter results")
Five of the six public sector banks which announced October-December quarterly earnings on Friday reported a decline in net profit over a year, owing to higher provisioning for bad loans and mark-to-market losses (writing down assets at current value) on their investment portfolio.
Pune-based Bank of Maharashtra was worst among these. It reported a 92 per cent decline in net profit to Rs 15 crore during the third quarter, as compared to Rs 194 crore during the same period of the previous year, due to a sharp rise in loan defaults. The bank reported the proportion of gross non-performing assets (NPAs) to the total at four per cent at end-December, as compared to 1.7 per cent in the same period last year.
Sushil Muhnot, its chairman and managing director (CMD), said: "The increased cost of deposits is one reason for the decline in profits. We have spent Rs 300 crore on staff costs and made a (bad loan, etc) provision of Rs 320 crore. In the past nine months, NPA cost has increased from Rs 1,137 crore to Rs 3,500 crore.”
The only exception in the pack was Mumbai-based Union Bank of India. It reported 15 per cent growth in net profit to Rs 348 crore, despite flat growth in net interest income. The provisioning for standard advances came down to Rs 24 crore from Rs 100 crore a year before,, while NPA provisioning dipped by Rs 56 crore. Gross NPAs (as percentage of gross advances) were 3.36 per cent as on end-December, up both sequentially and over a year.
“We think the worst is over for the bank in asset quality,” said CMD Arun Tiwari.
PNB
Punjab National Bank reported a 42 per cent decline in net profit to Rs 755 crore, due to a similar increase in provisioning. The latter increased 41.5 per cent to Rs 1,947 crore; this was mainly because the bank wrote off a sub-standard asset, of a troubled jewellery maker in which it had exposure close to Rs 900 crore. It also had to make a higher provision for investment depreciation, as bond yields hardened in the quarter, by Rs 219 crore. This was a sixfold increase as compared to the same period of the previous year.
"In difficult circumstances, we were able to hold on to the net interest margin, 3.57 per cent for the quarter and 3.52 per cent for the nine-month period (since the financial year began on April 1). We have managed to maintain the margin through the cost route. Though margins are under pressure, we hope to also maintain it for the current quarter," said K R Kamath, the CMD. He said the restructured asset pipeline was not significant at present.
Despite the decline in net profit, PNB stocks went up by almost six per cent on Friday, despite a flat broader market, as investors drew comfort from the results. “The positive surprise (from PNB) came on asset quality, which improved sequentially. Gross NPAs remained flat quarter on quarter, while net NPAs declined 5.5 per cent, in absolute terms; in percentage terms, both saw improvement. The addition to impaired assets also declined to 4.3 per cent, as compared to 6.7 per cent in the previous quarter,” said Saday Sinha, analyst with Kotak Securities.
Others
Bangalore-based Canara Bank reported a 42.4 per cent decline in net profit to Rs 409 crore, mainly due to higher NPA provisioning. Provisioning rose 68 per cent to Rs 1,052 crore for the quarter, while net interest income went up by 12 per cent to Rs 2,227 crore.
Another south-based lender, Syndicate Bank, reported a 25 per cent decline in net profit to Rs 380 crore as compared to Rs 508 crore in the corresponding quarter last year. Its gross NPA ratio jumped to 2.8 per cent in the quarter as against 2.31 per cent in the year-before period.
Higher provisioning for bad loans pulled down the net profit of Oriental Bank of Commerce by 31 per cent to Rs 224 crore in the quarter. Gross NPAs rose to 3.87 per cent of the total, from 2.98 per cent in the December quarter of 2012-13.
Pune-based Bank of Maharashtra was worst among these. It reported a 92 per cent decline in net profit to Rs 15 crore during the third quarter, as compared to Rs 194 crore during the same period of the previous year, due to a sharp rise in loan defaults. The bank reported the proportion of gross non-performing assets (NPAs) to the total at four per cent at end-December, as compared to 1.7 per cent in the same period last year.
Sushil Muhnot, its chairman and managing director (CMD), said: "The increased cost of deposits is one reason for the decline in profits. We have spent Rs 300 crore on staff costs and made a (bad loan, etc) provision of Rs 320 crore. In the past nine months, NPA cost has increased from Rs 1,137 crore to Rs 3,500 crore.”
The only exception in the pack was Mumbai-based Union Bank of India. It reported 15 per cent growth in net profit to Rs 348 crore, despite flat growth in net interest income. The provisioning for standard advances came down to Rs 24 crore from Rs 100 crore a year before,, while NPA provisioning dipped by Rs 56 crore. Gross NPAs (as percentage of gross advances) were 3.36 per cent as on end-December, up both sequentially and over a year.
“We think the worst is over for the bank in asset quality,” said CMD Arun Tiwari.
PNB
Punjab National Bank reported a 42 per cent decline in net profit to Rs 755 crore, due to a similar increase in provisioning. The latter increased 41.5 per cent to Rs 1,947 crore; this was mainly because the bank wrote off a sub-standard asset, of a troubled jewellery maker in which it had exposure close to Rs 900 crore. It also had to make a higher provision for investment depreciation, as bond yields hardened in the quarter, by Rs 219 crore. This was a sixfold increase as compared to the same period of the previous year.
"In difficult circumstances, we were able to hold on to the net interest margin, 3.57 per cent for the quarter and 3.52 per cent for the nine-month period (since the financial year began on April 1). We have managed to maintain the margin through the cost route. Though margins are under pressure, we hope to also maintain it for the current quarter," said K R Kamath, the CMD. He said the restructured asset pipeline was not significant at present.
Despite the decline in net profit, PNB stocks went up by almost six per cent on Friday, despite a flat broader market, as investors drew comfort from the results. “The positive surprise (from PNB) came on asset quality, which improved sequentially. Gross NPAs remained flat quarter on quarter, while net NPAs declined 5.5 per cent, in absolute terms; in percentage terms, both saw improvement. The addition to impaired assets also declined to 4.3 per cent, as compared to 6.7 per cent in the previous quarter,” said Saday Sinha, analyst with Kotak Securities.
Others
Bangalore-based Canara Bank reported a 42.4 per cent decline in net profit to Rs 409 crore, mainly due to higher NPA provisioning. Provisioning rose 68 per cent to Rs 1,052 crore for the quarter, while net interest income went up by 12 per cent to Rs 2,227 crore.
Another south-based lender, Syndicate Bank, reported a 25 per cent decline in net profit to Rs 380 crore as compared to Rs 508 crore in the corresponding quarter last year. Its gross NPA ratio jumped to 2.8 per cent in the quarter as against 2.31 per cent in the year-before period.
Higher provisioning for bad loans pulled down the net profit of Oriental Bank of Commerce by 31 per cent to Rs 224 crore in the quarter. Gross NPAs rose to 3.87 per cent of the total, from 2.98 per cent in the December quarter of 2012-13.