Provisioning hike to dent banks' bottomlines

The country's two biggest banks "" State Bank of India (SBI) and ICICI Bank "" are estimated to take huge hits on their bottom lines in the fourth quarter because of enhanced provisioning on standard loans in certain sectors.

The Reserve Bank of India (RBI) yesterday raised the provisioning for standard loans given to commercial real estate and capital market players and to consumers, including credit cards, to 2 per cent from 1 per cent.

The central bank aims to curb flow of funds from banks into real estate and capital market, in a scenario of escalating asset prices.

The higher provisioning requirement is likely to result in both SBI and ICICI Bank having to make additional provisioning of around Rs 300 crore based on their respective exposures to the targeted sectors.
 

SENSITIVE EXPOSURES
Bank	Commercial real estate	Capital    market
ICICI Bank	6,984	2,272
State Bank of India	4,574	2,275
Punjab National Bank	2,663	1,165
Citibank	1,967	304
StanChart	1,857	861
HDFC Bank	1,818	1,446
UTI Bank	1,660	477
Corporation Bank	1,607	368
Indian Overseas Bank	1,580	342
UCO Bank	1,413	300
Canara Bank	1,395	1,036
Bank of India	1,074	1,193
J&K Bank	1,039	197
Note : Figures as on March 31, 2006, in Rs crore

Taking into account the Rs 41,870 crore exposure of 13 major banks to commercial real estate and capital market as on March 31, 2006, the aggregate provisioning on account of these two sectors alone would amount to about Rs 900 crore.

These banks had a total exposure of Rs 29,638 crore to real estate, of Rs 42,178 crore of the entire sector at the end of March 31, 2006.

The capital market exposure of the 13 banks was Rs 12,231 crore out of the total sector's exposure of Rs 19,712 crore at the end of March 31, 2006.

Apart from SBI and ICICI Bank, the other banks include Punjab National Bank, Citibank, Standard Chartered Bank, HDFC Bank, UTI Bank, Corporation Bank, Indian Overseas Bank, UCO Bank, Canara Bank, Bank of India and Jammu & Kashmir Bank.

The aggregate additional provision on account of the increase in standard provisioning on loans to commercial real estate, capital market and consumers would be over Rs 2,000 crore.

Loans on credit cards, which are included in consumer loans, rose by 51 per cent as on October 27, 2006 over a year earlier to Rs 11,870 crore. Personal loans have also increased significantly.

In the case of ICICI Bank, the share of personal loans and credit card receivables has doubled to about 14 per cent of the bank's total loans portfolio in the nine months ended December 31, 2006. The second largest bank's retail loans portfolio increased by over 50 per cent in the first nine months of 2006-07.