A rise in bad loans and provisioning for non-performing assets (NPAs) resulted in two large public sector lenders, Punjab National Bank and Union Bank of India, reporting subdued profits. Bank of India and Dena Bank reported healthy profits, while Central Bank of India’s recovery efforts paid off.
Punjab National Bank reported a 12.7 per cent increase in net profit to Rs 1,246 crore for the quarter ended June 30. Profit growth was mainly driven by a 18.6 per cent increase in net interest income to Rs 3,695 crore and a healthy net interest margin (NIM) of 3.6 per cent. Gross NPAs went up from two per cent in the year-ago period to 3.34 per cent as of June 30.
Mumbai-based Union Bank of India saw provisioning for restructured accounts and NPAs increasing to Rs 507 crore as compared to Rs 370 crore in the comparative period a year before. It reported 10 per cent profit growth, to Rs 512 crore.
Net interest income or the difference between interest earned and expended was Rs 1,822 crore, a rise of 14.6 per cent year-on-year.
“Eleven accounts worth Rs 900 crore were classified as NPA and there was restructuring of Rs 1,642 crore, including one state electricity board’s account of Rs 1,200 crore which deteriorated the asset quality of the bank ” said D Sarkar, chairman and managing director. Net NPA stood at 2.2 per cent, up 50 basis points sequentially.
The results disappointed investors, with the Nifty PSU index closing four per cent lower than its previous close, while the benchmark indices were up more than one per cent on Friday.
“A few large PSU banks which reported quarterly earnings on Friday continued to disappoint the market in terms of asset quality. This did not lift the sagging sentiment for PSU banks, which are facing several economic headwinds like a deficient monsoon, potentially impairing borrowers’ loan repayment capability, unabating inflationary pressure and recent regulatory commentary on the provisioning requirement on restructured books,” said Saday Sinha, vice-president, equity research, Kotak Securities.
For Bank of India, the improvement in NIMs and write-back of provisions for treasury operations helped to boost net profit 71 per cent to Rs 887.5 crore, despite sluggish growth in net interest income of 11 per cent. It had gains in the form of write-back (for investments) of Rs 135.6 crore in the quarter, as against a provision of Rs 90 crore it made in April-June 2011. The NIMs improved to 2.27 per cent in Q1 of FY13, from 2.19 per cent for Q1 of FY12.
| BANK BOOKS Quarter ended June 30, standalone (in Rs crore) | ||||||||||
| Bank of India | Central Bank | Dena Bank | Punjab National Bank | Union Bank of India | ||||||
| Jun ’12 | % Chg* | Jun ’12 | % Chg* | Jun ’12 | % Chg* | Jun ’12 | % Chg* | Jun ’12 | % Chg* | |
| Total income | 8,550.03 | 17.23 | 5,624.97 | 16.22 | 2,278.85 | 37.90 | 11,710.97 | 24.60 | 6,561.10 | 21.51 |
| NII** | 2,043.55 | 11.00 | 1,377.65 | 3.56 | 612.24 | 37.10 | 3695.14 | 18.61 | 1,821.73 | 14.56 |
| Net profit | 887.45 | 71.48 | 335.95 | 19.65 | 238.63 | 41.97 | 1,245.67 | 12.72 | 511.59 | 10.16 |
| Share*** | 291.35 | -5.34 | 68.84 | -6.08 | 87.30 | -4.12 | 715.85 | -5.34 | 164.05 | -7.86 |
| * Change over YoY; ** Net interest income; *** BSE price change over previous close, as on July 27 Data compiled by BS Research Bureau Source: Capitaline | ||||||||||
Another Mumbai-based lender, Dena Bank, reported a 42 per cent increase in net profit to Rs 239 crore, driven by growth in both core income and treasury gains.
While the net interest income growth was 37 per cent, trading profits were Rs 40 crore, as compared to Rs 1 crore during the same period of the previous year.
“The profit was mainly driven by strong growth in net interest income. We have cut term deposit rates by 25 bps and plan to shed bulk deposits worth Rs 3,000 crore this quarter,” said Nupur Mitra, chairperson and managing director.
A Rs 900 crore recovery and upgradation during the first quarter (as compared to Rs 300 crore in the comparable period a year before) helped Central Bank of India to post 20 per cent growth in net profit to Rs 336 crore. However, the bank has reduced its provisioning coverage ratio to 40 per cent from around 65 per cent a year earlier.
