Asset quality of old private-sector banks worsened in the September quarter of FY18 along with a sharp rise in provisions. The spike in provisions also led to fall in net profit for most of these banks, data compiled by FE showed.
For instance, South Indian Bank reported a 144% year-on-year (y-o-y) rise in provisions to Rs 455.9 crore in Q2 FY18 which led to a 96% y-o-y fall in net profit to Rs 4 crore. The bank said in a regulatory filing that the provisions in the quarter included depreciation of Rs 252.39 crore on account of diminution in net asset value (NAV) of investments in security receipts (SRs) on the basis of NAV declared by Asset Reconstruction Company. However, the bank’s gross non-performing assets (NPAs) remained steady at Rs 1,766 crore in Q2, up 1.2% y-o-y.
VG Mathew, MD & CEO of the bank, told reporters after declaring its results that with the incremental provisioning made, the provision coverage crossed 50% which increases the prospects of recovery. “Had the exceptional provision not been there, the profit after tax (PAT) would have been Rs 169 crore for the current quarter. The operating profit of the bank has increased by Rs 163 crore (54.9 %) to Rs 460 crore,” he added. Karnataka Bank’s provisions rose 73% y-o-y in the September quarter of FY18 to Rs 225.9 crore and resulted in a 24.5% fall in net profit in the same period. The bank’s net profit fell to Rs 93.3 crore in Q2 FY18 from Rs 123.8 crore in the same quarter last year.
The bank’s Q2 slippages at Rs 374 crore included one large account of Rs 230 crore (housing-infra sector) that was downgraded to NPA. Analysts pointed out that the account was earlier recognised as SDR and the bank carries adequate provisioning thereon. Its standard restructured loans stood at Rs 690 crore and coupled with gross NPA, strategic debt restructuring (SDR) and sustainable structuring of stressed assets (S4A) make for 6.5% of loans (vs 8.6% in FY17). Even Lakshmi Vilas Bank reported a rise in provisions in the quarter. Its provisions rose 67% y-o-y to Rs 187.3 crore in Q2FY18 and leading to a 83% y-o-y fall in net profit to Rs 10.5 crore.
Its asset quality deteriorated as well, with gross NPAs more than doubling on a y-o-y basis to Rs 1,277.6 crore.
Parthasarathi Mukherjee, MD & CEO of Lakshmi Vilas Bank, told a business news channel that the positive part was that the bank has a watchlist of accounts that it has been keeping an eye on. “I am glad to see that a bulk has slipped in the quarter — Rs 630 crore — was from the watchlist. To that extent, my watchlist has shrunk to around Rs 1,700 crore,” he had said last week. However, Federal Bank and DCB Bank seemed to have bucked the trend and reported a rise in September quarter net profit by 31% y-o-y and 21% y-o-y respectively. While Federal Bank reported a 5% rise in provisions, DCB Bank’s provisions rose 14% in Q2 FY18.