A sharp rise in provisioning for bad loans has hit the bottom line of three public sector banks — Allahabad Bank, Central Bank of India and Union Bank — in the second quarter (Q2) of the current financial year.
Mumbai-based Central Bank of India posted a huge loss of Rs 641 crore against a net profit of Rs 112 crore in the year-ago period. Provisions for non-performing assets (NPAs or bad loans) swelled to Rs 1,661 crore from Rs 654 crore in Q2 of FY16. The provision coverage ratio (PCR) was 51.6 per cent. Gross NPAs were Rs 25,717 crore (13.7 per cent) against Rs 13,358 crore (6.38 per cent) earlier. Union Bank of India, another Mumbai-based lender, reported a 73.2 per cent drop in net profit to Rs 176 crore, from Rs 658 crore. Its net interest income in the quarter rose marginally to Rs 2,277 crore from Rs 2,107 crore in July-September 2015.
Union Bank’s provisions for NPAs rose to Rs 1,598 crore from Rs 924 crore in the corresponding quarter a year ago.
The PCR, which shows the extent of funds a bank has kept aside to cover loan losses) stood at 50.45 per cent. The bank expects to improve PCR to 55 per cent by the end of March, said Arun Tiwari, chairman and managing director. Gross NPA stood at Rs 29,862 crore (10.73 per cent) at the end of September 2016 — up from Rs 15,541 crore (6.12 per cent) a year ago.
The lender plans to raise up to Rs 3,500 crore capital through equity and bond offering. The board has given a nod to the capital raising plan valid a year. This includes capital infusion of Rs 741 crore by the government.
Kolkata-based Allahabad Bank’s net profit was Rs 65 crore in the quarter, against Rs 177 crore in the same period last year. In the first quarter, the bank had posted a loss of around Rs 565 crore. Total provisions (other than tax) and contingencies rose to Rs 814 crore, against Rs 703 crore in the year-ago period. The provisions cover for bad loans was 47.6 per cent. NPAs increased sharply to Rs 19,094 crore (12.28 per cent) against Rs 7,985 crore at the end of September 2015.
