Five public sector banks such as Bank of Baroda, UCO Bank, Central Bank of India, Allahabad Bank and Dena Bank on Friday registered a combined net loss of over Rs 6,700 crore for the quarter ended March 2016 due to multi-fold rise in provisions.
Bank of Baroda (BoB) alone reported a loss of Rs 3,230.14 crore for the March quarter, the second highest quarterly loss in the Indian banking history. The asset quality of the bank worsened further with gross non-performing assets (NPAs) or bad loans rising to 9.99 per cent of gross advances as of March 2016, from 3.72 per cent a year ago. Total provisions of the bank surged to Rs 6,857 crore from Rs 1,817 crore in the year-ago period.
Allahabad Bank and Dena Bank posted net loss of Rs 581.13 crore and Rs 326.38 crore, respectively for the quarter ended March 2016. Allahabad Bank’s provisions almost quadrupled to Rs 2,487.15 crore as against Rs 631.11 crore as bank’s gross NPAs rose to 9.76 per cent as on March 2016, from 5.46 per cent a year ago.
G Chokkalingam, founder and managing director, Equinomics Research said,”This is the bottom for public sector banks. Going forward situation will be moderate for the sector. However, one should invest in PSU banks where stocks are available close to their book value and whose business is going. Overall, an investor can avoid Bank of Baroda, Uco Bank, Dena Bank, Allahabad Bank and Central Bank of India in the present market conditions.”
Post results, Religare Institutional Research said, “We maintain ‘Sell’ on BoB with a March 2017 target price of Rs 115 as we expect the bank’s profitability ratios to remain subdued over FY17/FY18.”
Dena Bank gross NPA increased to 9.9 per cent as against 5.4 per cent for the quarter ended March 2015. Provisions nearly doubled to Rs 901 crore as against Rs 478 crore in the same quarter a year ago.
Uco Bank reported a net loss of Rs 1715.16 crore for Jan-Mar 2016 period against Rs 209.28 crore in the same period. Central Bank of India reported net loss of Rs 898.04 crore against net profit of Rs 174.29 crore in the same period.
Non-performing assets or bad loans in some cases have breached RBI’s tolerance level that could result in prompt corrective action. As per RBI directives, a prompt corrective action may be enforced in cases where gross NPA has crossed 10 per cent.
Shares of Bank of Baroda were trading over 7 per cent down at Rs 143.90 (at 10.30 am). Uco Bank and Central Bank of India were down 2.79 per cent and 3.78 at Rs 33.10 and Rs 75.10, respectively.
Dena Bank and Allahabad Bank were also trading lower by 3.42 per cent and 2.76 per cent at Rs 29.65 and Rs 51.05, respectively. The BSE Bankex was down 0.81 per cent at 18,884.81.
According to Finance Ministry’s annual report gross non-performing assets (GNPAs) of banks could soar to 6.9 per cent by March 2017 in a “severe stress scenario”. The gross NPA of the scheduled commercial banks, which was 5.14 per cent at the end of September 2015, may rise to 5.4 per cent by September 2016, it said quoting a RBI report.
With agency inputs